Use of the Income Approach in Valuing a Sand and Gravel Property in a Condemnation Proceeding
Real Estate Issues › Vol. 34 Nbr. 2, July 2009
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Summary
The legal concept of "Market Value" is applied by courts to determine the amount of just compensation for takings. "Market Value" has been defined as "what a willing buyer would pay in cash to a willing seller," but "Just Compensation" has no clear definition or valuation methodology. This article finds that valuing sand and gravel property using the income approach is the most appropriate method of valuation, and that valuation experts should use the same valuation process that is used by owner/operators when buying or leasing land. For this property type, valuation experts should use the same valuation process that is used by owner/operators when buying or leasing land, if only to reflect the marketplace and these market transactions. In such cases, the royalty income stream is both stable and directly attributable to the property itself, rather than to the business activity conducted on the property or one that relies primarily on the talent or skill of the owner.
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Extract
Use of the Income Approach in Valuing a Sand and Gravel Property in a Condemnation Proceeding
INTRODUCTION
The legal concept of "Market Value" is applied by courts to determine the amount of just compensation for takings. "Market Value" has been defined as "what a willing buyer would pay in cash to a willing seller," but "Just Compensation" has no clear definition or valuation methodology. This article finds that valuing sand and gravel property using the income approach is the most appropriate method of valuation, and that valuation experts should use the same valuation process that is used by owner/operators when buying or leasing land.VALUING SPECIAL USE PROPERTIESThe essential problem in the valuation of special use properties is the lack of availability of adequate data from the sales of comparable properties. In some cases, there may be a lack of sales within a reasonably defined market area or a lack of specific information about the existing sales to make essential ad...See the full content of this document
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