Conventional home on leased land-what's it really worth? (appraiser, fee, price)

[Badfish740]

Hi everyone. I am a first time homebuyer and my fiancee and I have been looking for a home in New Jersey for about six months now. Due to the locations of our careers we have been forced to look at homes in a particularly expensive area, which is the "halfway point" where both of us can commute about an hour from. After looking at many homes in our price range ($230-240K) we found a listing that intrigued us.

The home in question is a small bungalow on 1.9 acres of land located within a small community in Morris County, New Jersey. It is part of a "club" which has been in existence for almost 80 years. The club is comprised of a 32 acre piece of land which is mostly wooded. The land is divided into 12 home sites, with vacant plots of "common" land interspersed. The arrangement with the club is as follows:

Upon buying a home and becoming a member of the club, the homeowner must pay a $5000 application fee, which buys a 1/12 share in the land, so in effect, the the homeowner owns 1/12 of the 32 acre plot.

The home and any improvements (house, garage, septic system, well, etc...) to the land are the property of the homeowner, and the homeowner must pay tax to the municipality on them.

The land is owned by the club and is leased to the homeowner for a period of 99 years beginning at the date of purchase with the option to renew indefinitely. The lease may be willed, etc...

This is a conventional stick built home and is not a mobile or manufactured home of any kind. Basically this club was once a vacation getaway which eventually became a permanent residence. The residents of the club keep the arrangement rather than subdividing because they pay extremely low taxes on the land as one 32 acre plot. In an area where a home on 2 acres would cost in upwards of $8000 per year, most residents only pay $3-4000. The annual association fee which pays for road maintenance and other expenses includes the land tax, which comes to a total of $2000 per year. The homeowner then must pay the tax on any improvements on the land that they own. The taxes on the home we are looking at are $900 per year.

Our issue of course is the fact that this home is unlike any we've ever seen and we are at a loss as to try to determine actual value. We feel that the home is listed at an exorbitant price ($275K) for what it is coupled with the fact that the land is not included in the sale. We want to learn more about how a home on leased land is appraised. I do know that appraisers must evaluate other similar homes in the area, and there are 11 other homes in the community with the exact same arrangement-is that enough? If not, then how would an appraiser go about trying to determine value?

This home is very small (two bedroom, one bath, very small basement, tiny bedrooms, etc...) and is in need of updating, but we are not afraid of remodeling projects (my fiancee's father is a general contractor with 30+ years in the business), and we absolutely LOVE the location. The school district is also one the best in the state. We're just uncertain at this point of how to proceed. Can anyone give us some guidance?

[palmcoasting]

Get a Realtor very familiar with the complex you are talking about.

[mikeyyc]

I agree with palmcoasting. Also you are buying land, the equivalent of about three acres, it just isn't defined as the stuff under your home. You get title to 1/12th of 32 acres.

[juliann1977]

Badfish, it sounds intriguing. I would get a good real estate attorney ASAP. Given the nuances of the listing and property, I highly doubt a lot of NJ realtors could help you. I'm sure there are some, but you'd have better luck just going to a lawyer.

If you don't have one already, our RE is fantastic--really looks out for his clients' interests and has reasonable rates. He deals with mostly Monmouth and Middlesex counties, not sure about Morris, but I'd bet he could refer you to someone if need be. Send me a DM if you want.

Good luck!