While scrubbing a list in one county, I've come across several properties that look great, until I noticed their taxable assessed value is a fraction of their actual/total assessed value and the reason why is they have conservation easements on them. Are conservation easements a deal-killer, and do you just automatically remove these from your mailing list, or is there still a way to profit off these? There's no way for a subsequent owner to remove a conservation easement that was agreed to and recorded by a prior owner, correct?
@dl7573 - when you say "conservation easement", can you clarify what this means? Does this render the entire property unusable for any purpose or is there simply an easement going through a small portion of the property?
If you aren't sure what this means, it might be worth figuring that out so you can fully understand what impact the easement has on the property's value.
Thanks @retipsterseth, I think that's basically an aspect of why I'm asking. In the limited time I've been doing this, I came across one property with a conservation easement that placed a lot of restrictions on what you could do with the property but did allow the construction of a single family res of some small size, I think, so I'd probably still be willing to buy that at some price, but it does significantly affect the resale value. On the other hand, I've been coming across considerably more properties (at least in one county I'm looking at) with conserv easements that in effect say you can't build anything other than a walking trail on the whole property. So based on the latter, I was wondering if 1) I should just filter out all properties that have conservation easements and not even mail to those owners; or 2) should I be taking the time to look at the easement deed restrictions before deciding whether to mail to each one (what I've mostly been doing up to this point); or 3) should I mail to all of these owners anyway despite the easement, plan on looking through the restrictions in detail if and when a seller responds, and accept the fact that I'll probably be mailing on some properties that I really won't want to buy?
Or maybe I'm looking at it wrong. Is there any price that you would buy properties at, if it can't be built on at all (except for something like a nature trail)? If so, what's the target buyer / exit marketing strategy for a property like that?
@dl7573 I am actually actively working on a deal with a conservation easement and after speaking with the tax assessor, I actually view the easement as a benefit. While I am sure they work slightly differently by state/county, below is some of what I have learned and why it doesn't alarm me.
What it is (in my county):
- In this particular county you can enroll your property in the conservation program which means, for a period of ten years, you place limitations on what can be done with the property (for the sake of conservation, obviously) and in exchange your assessed value is drastically reduced (in this case, taxes for 12 desirable acres worth ~$50k-70k are only ~$200/yr vs ~$1,400 if there was no easement).
- Since you enroll in the program for ten years at a time, there is a penalty to "unenroll". This penalty is pretty steep (something like all tax savings already recognized plus a fee).
- The restrictions are not THAT restrictive. Essentially the goal is just to preserve nature as you can imagine. I was told by zoning officials that a single family home (or mobile home) would be permitted. Essentially you can just not use it for any commercial means.
Note: I was told that I should request a form from the tax assessor to be included with closing to essentially sign over the easement to me so I can recognize the tax benefits. I would recommend asking about this in your county.
My Take:
- Since my target buyers would likely be utilizing the property for recreation or a home, the limitation on commercial uses does not concern me (commercial use would require some zoning work anyways that doesn't make a lot of sense).
- In my case, the easement is 7 years into its 10 year term, so even if a buyer was interested in trying to re-zone to commercial, we are approaching the end of the easement anyways. I (or hopefully the buyer if I am able to pull off this whole assignment thing) can extend for a new ten years though if desired.
- Like I said, all states and counties are different but assuming you are dealing with a situation similar to mine, I would view it as neutral or even a benefit to the deal.
- That said, I agree with @retipsterseth in that I would discuss with the county the specific restrictions on the property and how long they last / how they impact usability/taxes. Regarding your question about how to approach mailing them, I would say 100% mail all of them. That extra ~$0.20 is nothing compared to the potential profits you could uncover.
2 Likes
Thanks @tclandbuyer That's really interesting! My understanding or assumption up to this point (and I could have been wrong) was that these easements were all in perpetuity in the two counties where I've encountered them so far. Based on your experience, I now think it's definitely worth leaving these properties on my mailing list and calling the county to verify these details if I get a responsive seller.
@dl7573 - got it.
1) This sounds like the easiest approach. You may throw away some opportunities, but depending on your time constraints, it may be worth the loss.
2) I wouldn't throw up this obstacle before you even send mail out... but if you get a call back on one, then yeah, it's probably worth the time to look at it before buying.
3) You could. There's an argument to be made that ANY property is a good deal at a certain price. With this in mind, you could just make your offers really, really, REALLY low on the ones that have the most problematic restrictions on them. However, if there are certain property values you don't want to mess with, that's when you might consider just removing them from your list altogether... but that depends on your parameters.
@dl7573 One thing I would say after working with conservation easements a bit in my 9-5--make sure you understand the terms really well. There are many entities other than counties that pay for conservation easements such as the Federal Government, The Nature Conservancy, The Trust for Public Land, etc. and they all have their own special twist on what they require. Most of the ones I've seen are perpetual as well.
3 Likes
@Bloomfieldks sage advice! Thanks for chiming in.
What Kristen said. I looked at buying a larger acreage property a few years back for ag use and it had a perpetual convervation easement which prohibited any ag or timber harvesting and any permanent building structures. In essence the previous owner took a payout that made it, for lack of another term, a private state park.