The challenge of valuing land



As development in our area increases, I tend to get more calls about land.

From builders looking for spec lots to potential buyers thinking they may want to build their “last home” to owners considering selling. Land value can be a difficult question to answer.

There are many variables that affect land value, but most of the time the driving factor comes down to what someone can do with it. What a developer paid per acre for 30 acres has nothing to do with the value of your 1-acre parcel.

A developer will get far more value per acre out of the 30 acres than someone will get from a small parcel of an acre or two. Here are a few items that may help explain what will be considered when determining land value:

Location – As with any type of real estate, location matters. Is it right on a busy road or a more private location?

Best use – Would someone want to own a home on this land? If it can be zoned for higher density or commercial then the value could go up, but don’t forget there is a cost in rezoning land.

Access to utilities – Power or sewer may be “down the road,” but understand the cost to run those utilities. If you have to bring a utility across the road, you could be looking at more than you bargained for.

Condition – So it’s surrounded by horse farms. If it’s completely wooded, the cost to turn it into pasture is not small. Is there an old home on the land? It could cost $10,000 or more to have it removed and the site cleaned.

At the end of the day, it comes down to doing your homework, whether you’re buying or selling.

View desktop version