Friday, February 26, 2010

City Approves Unbuildable Lots

City Approves Unbuildable Lots
>>> What would you do if the City dumped 2 feet of dirt on the road you
>>> need to reach your lots? >
>>> A realtor turned developer applies for a residential plat in 2003 in an
>>> outer outer ring suburb. Utilities and streets were constructed in 2004.
>>> In the middle of the road is an easement with a 3-inch high-pressure gas
>>> main and the Natural Gas company requires 3 feet of ground cover over its
>>> pipe.
>>> The city approved construction plans called for improvements within the
>>> 80-foot gas easement. And everyone forgot the gas pipe was there!
>>> The city inspector for the street and utility construction also worked
>>> for the same company as the engineer that designed the project.
>>> No one knows, or at least wants to admit, when the problem was
>>> discovered. Though it was likely at the time the curb was being pored.
>>> Once the Gas Company became aware of the problem, they tried to get the
>>> project stopped until this issue was resolved. The novice developer
>>> assured the Gas Company and was able to convince the city he would take
>>> care of the problem. The city allowed the improvements and street to be completed
>>> without having an approved resolution to the issue.
>>> >
>> The developer continued to ignore the gas company and
>>> was able to continue with the development. The city issued building
>>> permits to the lots that didn't require crossing the gas easement. And
>>> even reduced the developer's security to $25,000!
>> >>
>> To fix the problem the gas company's can either lower the main or put the
>> additional two feet of ground cover back. It would cost about $150,000 to lower the
>>> main.
>>> So the City just threw up its hands and dumped 2 feet of dirt on the gas
>>> easement to comply with the 3 feet of required ground cover.
> Before the gas line issue came to light the developer sold 6 lots to his buddy that
>>> required crossing of the gas line to access to them. The buddy financed the purchase
with a local bank. And never made a payment.

>>> So now the bank owns 6 twin home lots that they cannot obtain building permits
>>> for. And can only access by climbing over the berm on foot. And the
>>> bank still owes property taxes on the lots.
>>> Past issues of Heres The Dirt can be viewed at:
>>> Http://

Wednesday, February 17, 2010

$116,000 Property Tax Savings for 35 Acres

$116,000 Property Tax Savings for 35 acres

I left a voice message for Builder Bob about his property taxes then curled
up with the cats for a nap. I was deep into a good dream when I was awakened
by the phone. "I have 500 property tax statements. When can you come?".

I instructed Builder Bob to email his Property Ids. As I'm picking through
them I called Builder Bob. "I think you're business park land is overvalued".

"What business park? I only own residential land."

So I had to unravel the mystery.

An Outlot is created when you plat land and is typically one of two things:
1)a drainage pond, common area or some other unbuildable land; or 2)a future
phase of the development that has a preliminary plat that hasn't been
finalized and recorded.

Builder Bob's residential development had initially been an outlot that had
been broken off from the "The Business Park" and the legal description was
"Outlot E, The Business Park". When the plat was created the assessor didn't
look beyond the legal description so the land was mistakenly classified as
Commercial, even though it was zoned Residential and always had been. There
was a preliminary plat for 96 single family lots at the time the land was
classified as commercial.

Not only was it classified as Commercial, which can more than double the tax
rate, it was also valued as Commercial land. With 500+ parcels Builder Bob
missed this for 2008 and paid the ugly tax bill. But I caught it and
appealed for Pay 2009 and Pay 2010.

And the case was just settled at a property tax savings of $116,300.

Do you have any misclassifications lurking in your property tax statements?
They are more common than you might think

Thursday, February 4, 2010

Appraisers vs Realtors

Appraisers vs Realtors

I just completed a 2 day class from the Appraisal Institute. I was really
shocked to hear the Appraisal Institute Instructor, who lives on the East
Coast, slam NAR, the National Association of Realtors. And everyone in
class, except me, nods in agreement. While, as in every profession, there
are bad Realtors in the Twin Cities, both the Minnesota and Minneapolis
Realtors Associations are amazing organizations.

We were studying statistics in class. I asked the instructor about a
particular statistical report I typically put in my appraisals that is
published by the Minneapolis Realtors Association, who employs a full time
statistician. The teacher said "Realtors Associations just want to sell
houses and they skew the data to do that. I wouldn't use any report from the
Realtors Association." So NOT true-- at least in Minnesota. But this is what
this guy is teaching appraisers all over the county. Realtors are scum.

Do you think when an appraiser calls a Realtor with this attitude the
Realtor will be helpful and give the appraiser the info they need to
establish a realistic value?

Appraisers typically have superior training to Realtors on data collection
and analysis. But the Realtors understand the buyers and sellers, the people
side. My belief is that a critical job of appraisers is to document buyer
and seller behavior. But the classroom training is all about the Data, not
the People.

A reason for the Appraisers' animosity towards Realtors is Realtors are
perceived to be stealing business from Appraisers with the Broker Price
Opinion that some mortgage brokers and banks use instead of an appraisal.
Who is more qualified to say what a house is worth in a particular market?

The guy sitting behind me lives in Town X in Dakota County. I was excited to
talk to him because I'm doing a property tax appeal of townhome lots in his
community. I asked him if he thought these lots were worth $100,000 when
there are no lots sales to support this. "Oh yes", he said. "Because there
is no land in Town X". (not true).

"Well," I asked, "Have you appraised any townhomes in Town X?"

"Actually, no", he told me, "I do most of my work in Maple Grove."

Yet, he told me with certainty, with no facts to support it, that these lots
were worth $100,000. He calls himself an appraiser.

There are many wonderful appraisers that are passionate about their work and
do an excellent job. But an appraiser typically bases their opinion of value
on closed sales. A good realtor that really knows their market, especially
the agent sitting in a model every day, can tell me about the sales that
didn't occur. Understanding the sales that didn't happen is important when
establishing value when there are so few sales-which is true with land in
our recent market. But this is not taught in the appraisal classes I've

I believe the appraisal profession is much better served developing a
healthy respect and working relationship with Realtors than bashing them.