I undestod the part about how to value the structure, the improvments. What I did not get was how the the total value was to be determined. Are all the differenes just different ways of estimating what the market value is if there are no observations of transactions of similar parcels?
There was another part in whicn he seemed to say that being located next to a dump meant that Total value - value structures did not give the "land" value? But why? The dump reduces the total value and the structures are just the structures. What eles but the land value? Did he just mean that the value of the land near the dump is less than other nearby land?
A locational adjustment (which is what the “neighborhood next to a dump” is) is generally understood as a land value, affecting both the land portion and the total value, which is the sum of the building value and the land value
As for the total value, you determine that by comparing the property directly to recent market sales — you have the estimated building values which come from your cost tables and depreciation, and a total value which is based on observing comparable market sales, and reconciling these two (plus all the other complications mentioned in the article) gives you your land values
Perfect. That is exactly the baseline from which I can see no advantage to the exercise of stripping out the builing values in order to tax the "land." And it would not be once for all. Everytime the juridiction re-assesss it has to gather not only the market trnactions to estimate the total value of each parcel, but has to redo the replcement cost/deprciation exercise.
Functional obsolescence is mostly a function of market expectations. If most homes in a neighborhood have a 2 car garage but your home has no garage, it might suffer from functional obsolescence. If you wanted to sell your property, to be competitive with other houses for sale in your neighborhood, you might need to build a 2 car garage, if it makes financial sense. If it costs $10,000 to add the garage and you can recover that amount and hopefully more when you sell the property, the functional obsolescence is said to be curable. The $10,000 is the “cost to cure” the deficiency.
"Functional" depreciation is an odd concept for me here. If I'm understanding correctly, there's only a need for 'functional' depreciation because these cost books are used? It seems more like a pro forma adjustment?
Great conversation!!
I undestod the part about how to value the structure, the improvments. What I did not get was how the the total value was to be determined. Are all the differenes just different ways of estimating what the market value is if there are no observations of transactions of similar parcels?
There was another part in whicn he seemed to say that being located next to a dump meant that Total value - value structures did not give the "land" value? But why? The dump reduces the total value and the structures are just the structures. What eles but the land value? Did he just mean that the value of the land near the dump is less than other nearby land?
A locational adjustment (which is what the “neighborhood next to a dump” is) is generally understood as a land value, affecting both the land portion and the total value, which is the sum of the building value and the land value
As for the total value, you determine that by comparing the property directly to recent market sales — you have the estimated building values which come from your cost tables and depreciation, and a total value which is based on observing comparable market sales, and reconciling these two (plus all the other complications mentioned in the article) gives you your land values
Hey Lars, it is a dirty shame that tax increment financing is used widely in American cities. Land Value capture is so much better. What do you think of this article? https://shelterforce.org/2026/03/17/tax-increment-financing-harms-cities-lets-rein-it-in/
Perfect. That is exactly the baseline from which I can see no advantage to the exercise of stripping out the builing values in order to tax the "land." And it would not be once for all. Everytime the juridiction re-assesss it has to gather not only the market trnactions to estimate the total value of each parcel, but has to redo the replcement cost/deprciation exercise.
Where is the juice worth this squeeze?
It had better!
Functional obsolescence is mostly a function of market expectations. If most homes in a neighborhood have a 2 car garage but your home has no garage, it might suffer from functional obsolescence. If you wanted to sell your property, to be competitive with other houses for sale in your neighborhood, you might need to build a 2 car garage, if it makes financial sense. If it costs $10,000 to add the garage and you can recover that amount and hopefully more when you sell the property, the functional obsolescence is said to be curable. The $10,000 is the “cost to cure” the deficiency.
"Functional" depreciation is an odd concept for me here. If I'm understanding correctly, there's only a need for 'functional' depreciation because these cost books are used? It seems more like a pro forma adjustment?