Comparing acres to acres is like comparing apples to oranges. Traditionally, how to find the market value of vacant land is known as the investor’s dilemma because unfortunately, it can be difficult to determine a definitive value of an acre.
As a result, vacant land appraisals can actually cost more than traditional real estate appraisals. Depending on the details of the property, land appraisals can end up being more thorough and much tougher including an analysis of the highest and best use along with a considerable number of photographs. Appraising a larger tract of land that can be repurposed for any of several different uses may be more difficult than a home where the use is predetermined for you. The normal appraisal approaches don't work with land in many cases.
Risk can be a scary thing for an investor, and the value of an acre can be quite subjective. Since everyone needs a residence, but not everyone needs land, there's tends to be an absence of data when it comes to land. But there is hope! Fortunately for buyers, there are reliable factors you can use to reduce some of the risk and feel reasonably secure when it comes to valuing land.
Location can be one of the most important factors in considering land value. Most of us have heard the saying "location, location, location" when someone is referring to what drives real estate values. Is your land in a rural or urban area? How close is it to a school and what's the crime rate in the surrounding area? To learn more about the school ratings in your area check out Great Schools, or if you’re interested in finding out about crime rates where you live visit ADT's Crime Map. The location also affects what the property can be used for. Is your lot in an agricultural, commercial, or residential zone?
Are utilities, septic systems, or any wells available to serve the property? This is one of the reasons buyers walk away from a deal. Although the cost of putting in utilities such as electricity varies depending on location, you can bet it's going to be somewhat expensive. So whether or not the property already has these modern-day necessities can affect the value considerably.
The more freedom a buyer has to develop their land, the greater the potential value. Local governments designate various zones for different uses of land. It's very important to know what the land can be used for, especially what use is ideal. Can you build a structure like a manufacturing facility, office, or house? If it can be built on, are there height restrictions? What's the soil like? Could it be used for farming? Can you use it recreationally? Are there mineral commodities that can be mined? If the zoning of property you’re interested in doesn’t match up with your plans, it’s possible you can have it rezoned. If this is something you're interested in, check out our article detailing how to rezone land.
How desirable the property is can impact what someone is willing to pay for it (or if they're willing to pay anything at all). Is it waterfront land? Does it have “curb appeal?” What's the condition of the lot? Is it attractive from every angle? How difficult would it be for you to sell the property in the future? This will play a role as buyers look at the area and envision what they can do with it.
What do the neighboring properties look like? Would you rather live next to a clear, peaceful stream, or a sewage plant? Not only does the property you're interested in need to be desirable, but so does the land surrounding it. It's also necessary to find out what the plans are, if any, for the real estate beside your property because that can profoundly affect you positively or negatively.
One of the most frequently used tools in determining the value of real estate is to find the comparables. It’s called the sales comparison approach in the appraisal field. This refers to the land parcels which were sold recently that are similar to your land parcel. The Balance published a good article explaining more about the sales comparison approach in real estate appraisal. How similar are they to the property you're interested in and what were they sold for?
Comps are relatively easy to find when it comes to homes but can be challenging when dealing with land and other property types. LandSearch is an excellent resource to use when researching land comps. If you're looking for commercial real estate, Reonomy is a great resource as they provide up to 100 data points on any property including sales history, debt history, and comps.
Whether or not land is situated in a flood zone impacts whether or not a buyer will want to build on it, as well as incur the added expense of flood insurance. Check out our blog post to learn more about how flood zones affect property values and find tools you can use to determine if your property is located in a flood zone. For certain buyers, finding out a property is situated in a flood zone is a deal breaker.
Accessibility is a vital element in valuing land. Does the lot have a way to get to it, and how easy is it? Are there any easements associated with the property? Clearing land and having access put in can get expensive. According to Fixr, the average cost of building a 600 square foot gravel driveway is $2,300. HomeAdvisor reports the average cost of installing asphalt paving is $4,560 and a new concrete driveway averages just above $3,000, although asphalt is usually cheaper per square foot.
Supply and demand. Land is no different. If there's a large amount of land for sale in the region, it may be worth less than if available land is sparse. Rare doesn’t automatically translate into value, but often times it ends up turning out to be the case.
Topography is the shape of the land. The terrain of the land can dictate what the land can be used for just like zoning laws and deed restrictions. ArcGIS is a mapping and analytics platform provided by Esri that can be used to look at topography throughout the U.S. Is the lot relatively level and smooth, or is it rough and uneven with hills or mountains? Would the contour of the land allow someone to build on it? The more use options a property has, the more a potential buyer will typically be willing to pay for it.
Did you know that a couple hundred acres in one location can be worth as much or more than a thousand acres in another location? How? Timber. Timber is an extremely valuable resource depending on the species, size, quality, growing conditions, and the local market. When valuing land, make sure to be aware of any timber that exists on the property and take an accurate inventory along with finding out what the local market looks like.
There are also many types of precious minerals that occur throughout the United States such as gold, silver, platinum, palladium, oil, and natural gas to name a few. The presence of these minerals under a property can significantly increase the value. So it's important to do the appropriate research to find out if they exist in an effort to appraise land. For more details, take a look at our article on mineral rights.
Many people never get over the "I don't like to share" or "I'll do what I want" attitudes they had when they were a child. And when it comes to their private living space, who can blame them. There are several types of easements that can exist on a property, but to keep it simple, they can grant someone else access through your property to get to theirs, or restrict what you're allowed to do with it. Make sure to be clear about whether or not there are any easements associated with the property. If you'd like to find out more about what an easement is, head over to another one of our blogs discussing easement rights.
The type of soil that's prevalent on a tract of land can be a huge factor in determining what you can use the land for and as a result, affect the value significantly. Soil types are especially influential when valuing farmland, but play a role in assessing other types as well. The soil is an indicator of how much work is ahead of you to ensure an optimal, nutrient-rich environment is provided for the crops you'll grow. It can also tell you what type of crops could thrive, or if crops even have the potential to grow at all. The USDA's Natural Resources Conservation Service Soils provides useful resources for assessing your land's soil type.
People seem to be drawn to water. Whether it's an incredible landscape, a calming effect, or all of the above, waterfront land is one of the most sought-after types of property out there. In an effort to find the land value, pay close attention to whether or not there is a water feature on the property. A parcel located on the bank of a river or on a sandy beach can be worth substantially more than one that's not. To search for properties with a water feature, take a look at our waterfront land for sale.
The price per square foot of a house in the southwestern United States may vary drastically compared to the same size house in the Southeast. Similarly, the price of an acre of land varies according to many variables such as the ones described above. While valuing land is not an exact science, armed with some critical facts, it can be a great investment.