🚀 go-pugleaf

In ca.general David Marc Nieporent <nieporen@alumni.princeton.edu> wrote:
> In article <daco4f$drv$3@blue.rahul.net>,
>  Merlin Dorfman <dorfman@green.rahul.net> wrote:

...

>>> In practical terms, anybody who has been involved in a legal condemnation 
>>> actions knows that the amounts paid are always lowballed.  Monopsonies 
>>> backed up with guns tend to have an awful lot of market power.

>>     Quite the opposite; all the condemnation proceedings I've
>>seen give the property holders far more than the property would
>>be worth on the open market 

> Well, we can play dueling non-anecdotes all day, but since neither of us 
> have anything to point to other than our experiences, it won't get us far.

> But economic theory and logic suggest that property holders end up with 
> less.  Why?  Because if they fight the amount of the offer in court, the 
> *most* they can expect to end up with is the fair market value, *LESS THEIR 
> LEGAL EXPENSES.*  

     You are using a rational model. Somebody who has had a house in
the family for generations, or otherwise has an emotional attachment
to the property, just doesn't want to leave, or is unwilling to leave
for Fair Market Value, and so will fight though reason dictates
otherwise.  And a lawyer on an hourly fee basis might not object  :-)

> Let's say the owner thinks the house would be worth $500,000 in a fair, 
> arms-length, non-gunpoint sale.  The developer -- whether it be a public 
> official or more likely a private developer who has the public officials in 
> his pocket, as in New London -- offers $480,000.  The owner can take it -- 
> or go to court, win his valuation of $500,000, and end up netting $475,000 
> or less.  Very few owners can afford that, so very few fight unless 
> _severely_ lowballed.

     Or he can be irrational, as above; or he could hope for a 
"greenmail" settlement where the government will pay $550,000 to
avoid that same expensive court fight.

>>(before the redevelopment, of course
>>--after redevelopment it is worth a lot more).

> The value of a property, of course, is not determined by the value of the 
> current use, but by the discounted value of potential uses.

     I wouldn't pay a nickel (discounted or otherwise) for
"potential" uses that depend on politics and lawsuits.  You may
want to invest or speculate on the basis of that value, but there
is no basis for claiming anything that does not show up in today's
fair market value--as much or as little of the potential future
value that shows up there.