‘Fair market value’ and BLM auctions

As any real estate professional will attest, the slumping housing market is still brimming with owners who think their property is worth far more than it actually is. There’s a reason so many homes have gone unsold for six months or a year: the prices are too high. Yet these owners refuse to lower their prices enough to attract buyers.

Chief among Southern Nevada’s stubborn property owners is the federal Bureau of Land Management. The agency that controls most of the acreage surrounding the Las Vegas Valley holds periodic auctions to dispose of its surplus holdings, but Thursday’s affair was almost a complete bust. Of the 31 parcels offered, only one was sold. The others drew no bids.

If conducted and promoted properly, auctions are the fairest way to determine market value. But the BLM contracts with an appraiser to come up with a “fair market value” for the parcels prior to the auction. Those appraisals, based on comparable land sales of similar-size and nearby properties, become the minimum bid instead of a flexible starting point.

A common-sense observation for the BLM: If no one makes an offer on your property, your listed price is not “fair market value.”

Goodness knows Clark County residents have seen local governments grant far too many sweetheart land deals to their pals at the public’s expense. But those giveaways were made either in secret or without soliciting competing bids.

Auctions are transparent by their nature. And right now, the public bears all the costs of managing vast amounts of land put to no productive use whatsoever. Moving these tracts into private ownership and onto the property tax rolls serves the public interest more than sticking by inflated values and refusing to sell.

The next time the BLM holds an auction in Las Vegas, the agency should consider changing the format to a Dutch auction, also known as a descending value auction. If no one bites at the appraised price, the auctioneer lowers his asking price until someone bids. Competing investors and businesses won’t let their rivals get away with a great deal. If the price is truly “fair market value,” they’ll raise their hands — and taxpayers will benefit.