On the BorderOn the BorderAppraising LRGV Land Impacted by Wall ConstructionCharles E. Gilliland2020-11-19T06:00:00Zresearch-article
Land Markets

​The South Texas border wall's effect on land values has inspired spirited discussions among appraisers. Often these disputes have produced litigation with dueling appraisals based on differing interpretations of market data.

A number of reports are available from the United States Department of Justice (DOJ) to help appraisers in rural areas of the Lower Rio Grande Valley better understand the region's land market. They ensure access to pertinent information about controversies and provide guidance on future individual appraisal assignments of real properties being acquired as part of the proposed wall construction.

One such report is the Real Estate Market and Sales Study of The Lower Rio Grande Valley to Support the Proposed Border Wall Construction Project Within Starr, Hidalgo, and Cameron Counties of Texas. The report includes sales data and analysis that can assist with identifying and measuring land characteristics that influence market value. It is intended to help the user “arrive at some uniformity as to a range of adjustments that the data is indicating for these transactional and property adjustments."

Prepared by three Member Appraisal Institute appraisers, the report contains exhaustive analyses of 1,286 sales of properties in Cameron, Hidalgo, and Starr Counties. Focusing on agricultural properties reduced the number to 80 purely agricultural sales. Analysis of those sales relies on the allocation of land sale prices presented in the textbook Valuing Rural America, published by the American Society of Farm Managers and Rural Appraisers. Reflecting the productive capabilities of the soils, this system allocates sales prices based on the composition of the soils on each property.

The DOJ's companion reports, found at https://www.justice.gov/enrd/real-estate-market-and-sales-study-rio-grande-valley, offer an analysis and sale-price allocation for each sale gathered for the overall study. They begin with a detailed color aerial map of the subject property along with basic information about the transaction, including price, size, date of sale, land use, and location. The analysis continues with detailed descriptions of the property, a breakdown of the property's soil types, and the contribution of each soil type to the overall sale price. The analysis has United States Geological Survey (USGS) topographic maps and a soils map that shows the location of each soil type on the property. Finally, the sale is compared with a comparable median sale price adjusted for differences between the properties.

Maps 1 and 2 and Tables 1 and 2 show the analysis for the first listed sale (RGV502). The sale shows the adjusted price exceeded the actual price by 23 percent. The difference might have resulted from plans for the border wall to bisect the property. The seller viewed the wall as a negative influence on price. However, the buyer indicated it had no impact at all. Plus the property lacked secured legal access with the owner depending on informal permission from the International Boundary and Water Commission to use their levy. Lack of access caused the existing tenant to decline to purchase, so the negative impact might have resulted from the access issue. The DOJ's reports contain this type of detailed analysis on each property listed.  

The authors of the report concluded that agricultural and rural residential uses dominated areas affected by the border wall project. Salient influences on sales prices included market conditions related to date of sale, property rights conveyed (including water rights), and location. Physical factors impacting price included size, access, soil class, amount of floodway, amount of irrigation, and amount of land with development potential. The analysis in the main report included adjustments for these factors.

Ultimately, the authors see no evidence of a border wall affecting agricultural land values. However, the report does note that other appraisers should not use the information without independently verifying and analyzing the data. The report's greatest value may be in its presentation of the data and the analytical approach applied to the agricultural properties making up the study.

The reported analysis of specific sales detailing the facts about the transactions is required by the DOJ document entitled Uniform Appraisal Standards for Federal Land Acquisitions, colloquially called “The Yellow Book." In addition, the reported information conforms to requirements of the Appraisal Institute's Code of Professional Ethics and the Standards of Professional Practice and the Appraisal Foundation's Uniform Standards of Professional Appraisal Practice.

Dr. Gilliland (c-gilliland@tamu.edu) is a research economist with the Real Estate Center at Texas A&M University.

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On the BorderOn the BorderLand Markets
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