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Dear Pay Dirt,
I’m having a problem with a generous gift that I received from my (still living) grandmother. Before downsizing and moving into a condo, my grandmother lived on a 14-acre property in the middle of the woods.
About a year before she decided to move out, she purchased a smaller plot of land (1.65 acres) that abutted her property. She bought it in my name as a gift and paid $22,500 for it. I have been paying about $120 in taxes on it each year ever since.
This fall, she finished paying off the property, so I decided to sell it. It turns out that the land was only valued at $8,000, it’s totally undeveloped, and nobody wants it. Local realtors won’t touch it, the neighbors don’t want it, and even those “we buy land” websites aren’t interested. At this point, I would be thrilled to get $5,000 for it, but mostly I just want to stop paying taxes on land that I don’t use and don’t especially want. My grandmother, on the other hand, insists that this land will become more valuable over time. I doubt that because it is in the middle of nowhere and technically too small to build on without special permission (the town it’s in requires 3 acres for residential building). What do you think? Is there a way to get rid of this property that I haven’t thought of? Or should I keep holding on to it? It’s in Connecticut. My top priority is to stop having to pay taxes on it. I would love to get even $1,000 for it, but I don’t need the money.
—Woodland Woes
Dear Woodland Woes,
Ultimately, you need to figure out how many headaches you will go through for a profit. If you’d rather never think about this property again, you need to find a way to sell or donate the land, even at a loss. If it is too much of a hassle to sell it for you right now, $120 per year of property taxes sounds like a low fee to push the problem down the road until the marketplace changes.
It’s one thing to want not to be burdened by a property you didn’t ask to own. But you need to decide how bullish you want to be on the property’s future if you decide you want to keep it as an investment. Your $120 annual property taxes is a low carrying cost (I pay more for Netflix) if you think long-term potential exists. While there’s currently a zoning minimum for residential buildings, zoning changes all the time, especially after pro-development citizen advocacy. You noted this property is in Connecticut, which by my Oregonian standards, doesn’t have any property that’s truly “in the middle of the woods.” The entire state is only 70 miles wide and 110 miles long, and plenty of people live in bedroom communities and exurbs in Connecticut and commute into New York City. With some patience, owning a plot of land in a small state with a future of development could have the upsides your grandmother anticipated.
I also wonder how you determined the property is only worth $8,000—clearly, the property was worth more when it sold because your grandma paid more for it. If the last seller could get $22,500 for the land, that was the market price. While the county may have assessed the lot lower (which results in lower property taxes), the market value is determined based on what a buyer is willing to pay. A change in development laws or a neighbor’s interest in expanding might shift the property’s market value.
Even if the land isn’t developable currently, there are still a few creative options. You could sell or lease the property to a company focusing on carbon recapture projects. These companies, like NCX and Landgate, acquire land and agree not to develop it as a carbon offset. They will either pay you annually as part of a long lease or buy the land from you upfront. You could also list the land for sale by owner on a website like land.com to reach potential speculative land buyers beyond your neighbors. If you simply want to ditch the property and be free of the property taxes, you could likely donate the land to a nonprofit with a land donation program like The Nature Conservancy. In this case, it’s best to be strategic and contribute in a year where the donation would lower your tax bill. You could also re-approach the neighboring landowners with a lower price or even offer them the property for only the transfer cost. It won’t be a net profit for you, but you won’t have the land hanging around your neck.
Worst case scenario, you stop paying taxes and ignore the situation entirely. Eventually, the county will foreclose on it—and that will remain on your credit report for seven years. I’d personally pay $120 a year in property taxes to keep my credit clean and avoid the tax lien headache.
—Lillian
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