2. Value impact.

Ah, this is FAR more complex. It could take pages of boring stuff. So let me try to distill it down to bare bone basics.

for this discussion, let's equate Market Value and Assessed Value.

Now come with me to the mythical town of WhereM. In this Town, which is implementing sewer neighborhood/area by neighborhood/area, we find two neighborhoods to focus on. the first has been notorious for many years for cesspool/septic failures. This factor has had a negative impact on the sales & marketabilty of single-family dwellings located therein, resulting in LOW sale prices. This market data (LOW sale prices) should be taken into account in estimating market/assessed values in the neighborhood.

the second neighborhood, which has single-family dwellings similar to the first neighborhood in all physical & locational characteristics & attributes, has a reputation for well-functioning septic systems. This has been reflected in sale prices that are HIGHER than the first neighborhood. This market data (HIGHER sale prices) should be taken into account is estimating market/assessed values in this neighborhood.

for our little hypothetical, we have created two neighborhoods which are similar in all respects save one: the sewage disposal question. Thus Neighborhood 2 will have higher sale prices, and therefore higher market/assesed values.  Now, connect BOTH neighborhoods to sewer.

Problem solved in Neighborhood 1. Now, Sale Prices are comparable to Neighborhood 2, and thus market/assessed value SHOULD rise in Neighborhood 1.

Neighborhood 2? mavbe...but maybe not. If you substituted one functioning system for another (i.e septic for sewer), is that enough to extract premiums in the sale prices from potential buyers? That question may be answered by reviewing the experience of sales in other neighborhoods which were converted to sewer.

You see, the answers are MARKET-driven. P-Span's original question was COST-driven. In fact, in a situation such as my hypothetical Neighborhood 1, the value increment from correcting a physical problem AS WELL AS A PERCEPTION PROBLEM may exceed the cost of the betterment. that's the way markets work.

So my friend P-Span, there is no one neat & tidy answer to your question. And remember, my hypotheticals were set-up to address a single variable. In the real world, in real time, in real markets; sale prices (and thus values) are determined by the confluence of many variables. Therefore, it is extremely difficult to isolate one variable and pronounce "that one" as being the determinant of value. Exception: waterfront property.

For context...here is my original post on WW..

I have a couple of questions I’m hoping somebody might be able to answer. Would the assessed value of the property go up after the betterment? Maybe not dollar for dollar…but can it be assumed that a property valued at 225K before the betterment would be valued 15-20K more after? Also, if the property sells, is any outstanding debt on the betterment loan to be paid at the time of the sale? (like a home equity loan)..just curious. For the record, when I bought my house (’01) it had “town sewer”..a “selling point”..(according to my realtor).. one I’m sure I paid for at the time (“built into” the cost of my home). Thanks in advance for any answers offered.

WW: Sewer questions continue at Saturday meeting

TBW
P-SPAN

Last edited by P-SPAN (2010-08-01 22:42:54)

Nota is the man!!!
To further extend on number #1, it is doubtful that the lender would subordinate their position to the Town over a sewer betterment.

Good question for Nota...I have no idea.
When I was a Selectman we operated under an entirely different system. The fact is the plant was underused and caused odor problems. That was the biggest issue that we faced when I served.
I would love to be educated too!