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Dallas Real Estate: Teardowns Bring Land Values Up, Structure Values Down?

Posted on October 6th, 2009 3:30pm by Candy Evans
Filed under Changing market trends in Real Estate, Real Estate, Realtor News, Tear Downs, urban living

Not sure I follow the logic in this Advocate piece from May, saying that tear-downs push land values up and home structure values down. Do you see what I am missing?

6 Comments to “Dallas Real Estate: Teardowns Bring Land Values Up, Structure Values Down?”

Matt @ October 6th, 2009 at 4:10 pm

Sure. Location, location, location. If the market value of the property as a whole is stable or appreciating, but the structure itself is depreciating (or negligible, in the case of a teardown), then the increase in value is obviously in the lot, not the structure. In fact, in a pure teardown situation, the structure value to the buyer is probably negative — it’s going to cost a lot to raze the property and start over.

This is common for DCAD — they’ll have a flat value (say $80K) lots in an older neighborhood, have a teardown (or complete remodel) or two, and revalue all the lots in the neighborhood to a new, higher value (say $200K). Then the corresponding structure values are adjusted down $120K (more or less) so that the total approximates their view of market value.
Jeff Duffey @ October 6th, 2009 at 4:18 pm

From the article, “while their total appraisal value didn’t change dramatically, the value of the land skyrocketed and the value of the property dropped just as much, sometimes as much as nearly $100,000.”

Example:
Last year’s #’s: Land=$100K; Structure=$400K; Market value=$500K.

New tax year’s #’s: Land=$200K; Structure=$300,000; Market value=$500K.

Unfortunately, this isn’t what the article was mainly focused on. Headline is somewhat misleading.
JenLArt @ October 6th, 2009 at 6:25 pm

What’s happening is a slight of hand by the City…they’re devaluing the house (because the market’s been bad and housing prices are down) and overvaluing the lot, so that they can recoup their tax levy somewhere on your property regardless of the housing market.
Get it?
Candy Evans @ October 6th, 2009 at 10:42 pm

That’s what I suspected, but thanks for confirming!
ClassicUrbanHomes @ October 7th, 2009 at 8:42 am

Generally concur with the above. Having successfully fought about 35 property values over the past three years, one thing is certain at DCAD – the only number that matters is the total appraised value. They won’t listen to arguments about lot value only or improvement value only. The total number is what is what is taxed – not each part separately. The only time it will effect anyone is when the house is torn down.

In the end, the total appraised value should approximate the true market value. If not, go fight – it’s not hard to do at all. Shoot us an email if you want any pointers.
LakeWWWooder @ October 7th, 2009 at 1:08 pm

Another problem is that they are lowering the value of the improvements and raising the value of the lots in historic districts (such as Junius Heights ‘bungalow heaven’) where you cannot tear down the structure and sell it for lot value and in conservation districts and NSOs (such as Cochran Heights next to trendy Henderson) where you are restricted in what you can build and the demand for teardowns has vanished.