THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: Saturday, September 3, 1994 TAG: 9409010444
SECTION: REAL ESTATE WEEKLY PAGE: 10 EDITION: FINAL
COLUMN: About the Outer Banks
SOURCE: Chris Kidder
LENGTH: Long : 115 lines
Advertisements claim diamonds are forever but the ads are wrong. When it comes to earthly possessions, only one thing earns endless permanence: Land. It can't be misplaced or lost. It can't be destroyed. It has existed since the beginning of time.
In theory, owners' rights to use their land extend to the center of the Earth. Above ground, the sky's the limit. Literally.
In practice, mineral, air and water rights, government regulations, deed restrictions and other factors can supersede ownership.
Private ownership of land and the idea that land is a commodity to be bought and sold as an investment to increase our monetary wealth are relatively new concepts in the broad picture of civilization.
The roots of private ownership go back to 5th century Rome and 12th century England. But private ownership of land as we know it today is, primarily, a Western concept growing out of the social and economic upheavals in the Industrial Revolution which swept Europe during the 18th century.
Private ownership of land is not universally accepted. Nomadic and tribal peoples usually see themselves as stewards of land, not owners. Communistic or socialistic societies believe in shared or state ownership.
Ownership of land in other cultures may rest in the hands of kings, lords, religious leaders or other figures of power.
Our own legacy, however, was set by our founding fathers who were anxious to part ways with their feudal European heritage. While private ownership was becoming common in England and western Europe in the 1700's, Americans took this system (an allodial system, in legal terms) one step further.
Our founders saw individual ownership of land as a God-given right.
Today, we profit from - and pay for - a government that guarantees this right and encourages us to exercise it.
Land is valuable because of the physical characteristics that make it a forever kind of thing.
The habitability or usefulness of land may change (dry land might be covered with water, for example) but land - the Earth's skin - is always there.
Land is heterogeneous: there are no two pieces of land exactly alike. The uniqueness of land adds - or detracts - from its value.
While we all agree that land is valuable, consensus on the value of a specific piece of land is harder to come by.
Formulas and expert opinion aside, the bottom line is that land is worth only what someone will pay for it.
The unpredictable bottom line is what I frequently hear about from readers.
They want to know why the value of land they've bought hasn't increased. They want to learn some trick to sell land quickly and still make a profit.
Most of these readers would not consider themselves speculators.
They looked at their investment in land as a sure thing. They're learning that investment carries risk, no matter how solid and timeless the commodity is.
Most real estate investment experts advise against buying unimproved land.
``Do not invest in land any money you may need in the foreseeable future,'' advises Carolyn Janik, author of ``Money-Making Real Estate. ``Raw land is among the most illiquid vehicles in the general field of real estate.''
``Land is hard to sell,'' she says. ``In fact, it's hard to get your money out of a land investment when it has appreciated considerably.''
Undeveloped land has no immediate potential, says Robert Allen, one of the best-selling real estate investment authors in the last decade.
``It is the kind of ground that is only good for holding the earth together.''
Understanding the risk involved in buying land as an investment requires understanding how value is determined. It's not an exact science.
Determining the value of land begins with three questions:
What's the best use for the land?
Is there sufficient demand for this use?
What other land is available for this use?
Recent sales prices of similar properties have more impact on the current value of your property than the price you paid in the past.
The past may be of little concern, but the future can make a substantial impact.
Eminent domain - the government's right to take private land to serve public needs - and the government's right to restrict the use of private land through land planning and zoning ordinances, affect land value.
Natural disasters, the economy and a host of other unpredictable goblins can make or break the value of any given piece of land.
And if land in general is a difficult investment, Outer Banks land is even more so.
Most buyers and sellers in the Outer Banks market are absentee.
They're affected by what's happening in Washington, in Philadelphia, in New Jersey or Pittsburgh.
There's no easy way to get a handle on economic factors.
I've heard from readers who bought westside lots in the mid-1980's counting on the real estate boom to last long enough to make a tidy profit on resales. It didn't happen. It may be years before these properties fully recover.
The capacity of the Outer Banks is finite, limited by the island's ability to absorb sewage, provide fresh water, carry traffic and dispose of solid waste.
Land values are intrinsically tied to these services.
I've heard from readers who bought four-wheel-drive property north of Corolla in the 1970's thinking a paved road would be built. The road wasn't built. They want to sell the lot but, without the promise of a road, the demand won't support the price needed to recoup their investment.
The Outer Banks are environmentally fragile.
Regulations to protect the land and its natural resources are serious considerations.
I've heard from readers who bought land in South Nags Head in the 1960s. They discovered twenty years too late that federal wetlands regulations and town building codes have made their lot unbuildable.
Land may be forever, but it's far from a sure thing. MEMO: Chris Kidder covers Outer Banks real estate for Hampton Roads Real
Estate Weekly. Send comments and questions to her at P.O. Box 10, Nags
Head, N.C. 27959.
by CNB