A land appraisal is a process of assessing the value of land. This assessment can determine the amount of compensation a property owner will receive for their property.
Like a property appraisal, a land appraiser will research the land and compare it to other similar land parcels sold in the general area.
Land appraisals can estimate the value of a large tract of land or a single building lot.
Land is not cheap, even if it does not have any improvements. The cost of vacant land can vary tremendously based on location.
For example, one hundred acres in Maine will be cheaper than one hundred acres in California or Massachusetts.
A residential building lot can also vary incredibly. It would not be uncommon to pay $500,000 or much more for a building lot in a highly desirable executive area.
On the other hand, you may be fortunate enough to pay less than $100,000 in some states in a rural area. Even raw land that has the potential to be built on has tremendous value.
Many Factors Influence The Value of Land
Many variables can influence land value, including location, size, topography, usability, and utilities.
When investing, it’s essential to make sure the money you’re spending is worth it.
Land can also have hidden issues that are difficult to spot as buyers. The area may flood during storms or have poor soil quality, making it challenging to build on.
Land appraisers will inspect the property to ensure it’s a good place for your home or business, and they’ll also calculate its fair market value, so you don’t overpay.
If you are applying for a land loan, your lender may require that you have a vacant land appraisal.
If you’re buying a vacant lot with cash, it’s good to have an expert look at the property. Here are some critical things to know about land appraisals.
What is a Land Appraisal?
Land appraisals estimate the worth of a property given by someone who has been professionally trained in this field. The process is very similar if you’ve ever had your property appraised.
A professional appraiser will schedule an inspection to look at the property and its features, strengths, and weaknesses.
A land appraiser will use other lots or parcels in your area to develop a valuation. These are considered “comps” or “comparable sales,” just like when appraising a house. A qualified appraiser will use the sales comparison approach to determine the property value.
It will be similar to finding out what a house sold for.
If there are no sales of similar properties in your area, the land appraiser may use other methods to value the lot. Two different valuation methodologies are the income or cost approach.
If the vacant land appraisal involves unique research, it may take longer to complete.
After the appraiser has finished their work, you will receive a written appraisal report with their findings. The real estate appraisal will be sent to them first if a mortgage lender is involved.
The land’s appraised value will be one of the main things noted in the report.
How Do Land Appraisals Work?
As mentioned, land appraisers use sales comps to determine the value of vacant land.
Appraisers usually assess the highest and best use of the land first when making comparisons. The best use for a piece of land is the most profitable and feasible way to develop it.
Property appraisers consider zoning regulations and the location, topography, and accessibility of a property when making an assessment.
For example, suppose a piece of land is in an area with residential and commercial properties. In that case, the appraiser will need to analyze if the land will have more value as business property or for constructing a home.
They may need to determine if the local zoning will allow commercial development. If the city or town says the property can be one of the other, the appraiser will act accordingly in determining a value.
They’ll look for similar sales in order to find the best way to develop the land.
Land appraisers will use comparable properties to calculate the value of the property. They may adjust this value based on differences like size and location.
It can sometimes be challenging for a land appraiser if there are no appropriate comps. When there are few applicable comparable sales, the appraiser might be forced to use a different valuation method.
For example, the appraiser may determine whether the income approach is an appropriate valuation method for the land. If the property is used for business purposes, the appraiser can use projected income to value the land.
You can look for land comps yourself by visiting one of the best real estate websites.
What Do Land Appraisers Analyze to Value a Piece of Land?
Many variables will go into valuing either a vacant lot or a parcel of land. If it is a parcel of land, the appraiser will need to establish how many building lots will be able to build on it.
Once that is determined, they will also have to understand the cost of developing the land. Things such as the amount of road and the expense of installing utilities will need to be factored into the evaluation.
Appraising a large tract of land can be far more challenging than valuing a single building lot. Many features of a vacant piece of land could make it more or less attractive to a buyer. For example, heavily wooded vs. a pasture or hilly vs. flat.
Some of the essential factors a land appraiser will consider when appraising land are as follows:
How Accessible is The Land?
Appraisers consider accessibility when valuing land. The appraisal can include whether the property is accessible by car, train, or foot.
Access to rural vacant land can be challenging, especially in areas with few roads.
Property owners with longer road frontages will typically receive higher appraisals than those with shorter road frontages. The same can be said with residential construction, as you are likely to get more building lots.
Most cities and towns will require new construction to have a specific amount of road frontage. It will be spelled out in the local zoning by-laws.
Landlocked properties will have minimal value compared to those that can be developed.
What Are The Improvements and Utilities?
Land that already has a road in front of it will be far more valuable than a parcel that needs roadways to be installed.
Additionally, along with roads comes the installation of utilities. Installing water, sewer, and electricity can be a significant expense. It can also take quite a bit of time to install.
If a piece of land has public sewer, it will typically be worth more money than one that is serviced by a septic system. Septic systems are far more costly to install. The cost of a septic system could be more than double that of public sewer.
If the land conditions are not ideal, installing a septic might not even be possible. Buyers need to take these things into account when making a land purchase.
If a property already has infrastructure, it will appraise for a higher amount than a raw, undeveloped plot.
When the parcel has been improved, such as being landscaped or fenced, it could fetch more money.
Size, Topography, and Shape Can Matter With Land
The size of a piece of land undoubtedly will be an essential variable for value. Most of the time a five-acre parcel will be more valuable than one acre. Many land buyers will ask how big is an acre to get an idea of its size. How many square feet of acreage can factor into the value.
Small parcels of land typically sell for a higher price per acre than larger plots of land. A land appraiser may factor in how much demand there is for a parcel of a particular size and calculate the value accordingly.
Shape and topography are important considerations when developing a property because they affect how it can be developed.
Lots that are oddly shaped, typically having fewer usable acres and less road frontage, may be less desirable than standard square parcels.
A property with rolling hills and lots of rock and ledge will be more challenging to build on and appraise lower. The same can be said with land with a high water table.
If there is considerable conservation land or the property is in a flood zone, the land could be valued lower.
Extra precautions will need to be taken to ensure there is no flooding. All of these variables can be determined when a property survey is completed.
Location and Surrounding Properties Always Matter in Real Estate Valuation
The land location is always going to be a significant variable in determining value. There is a reason real estate agents are always preaching location-location-location – it matters a lot!
Compared to rural vacant land, land in urban and suburban areas is worth a significant amount more. In some places, building lots in urban and suburban areas is impossible to find. Supply and demand can play an important role in land value.
The local market for residential properties will also play a role in the value of a property. Land in desirable parts of town with easy access to work, schools, shopping, and restaurants also value their properties higher than those in less desirable areas.
Appraisers may also look at surrounding properties to see how the neighborhood changes and develops.
If a rural area shows signs of population growth, for example, the local government may consider when making decisions about how to allocate resources.
Additional Amenities Can Be Significant Boost Land Value
If a piece of land has lake or ocean access, it is almost always worth more money. Being located on the water always brings additional value.
If the land offers beautiful views such as mountains in the background, that could also influence the value.
Amenities make lots more valuable because they are much harder to find, and buyers will pay the money to get them. The sale price and appraisal value are almost always higher when these additional features are present.
Environment Factors Could Dampen Land Values
If it’s been determined that a parcel of land has been contaminated in the past by some environmental hazard, it will undoubtedly impact the value.
An appraiser will perform research with the city or town to make sure there have been no contamination issues that could lower the land value.
Easements and Encroachments Could Impact Land Value
If a property has easements of encroachments, they could affect the market value of the land. How much impact there is would depend on how the usability was affected.
Alleged encroachments are necessary to resolve because you might not be able to get land financing or proper title insurance. When purchasing land, it is essential to know the exact location of lot lines.
Numerous easements could also affect the desirability of the property. Each circumstance can be different. Due diligence will undoubtedly be crucial.
Like buying a house, ensuring a clear property title will be necessary.
How to Get a Land Appraisal Near Me?
Are you interested in getting a land appraisal? It would not be unusual to wonder how to get land appraised when you’ve never done it before. You will need to get a land appraiser nearby. An experienced land appraiser will be best.
One of the better ways to find a land appraiser will be heading to Google. You can do an online search for a land appraiser near me, and you’re bound to find some beneficial results. Land appraisers will often advertise their business online.
It might also be helpful to search land appraisal near me for additional results.
The American Society of Farm Managers and Rural Appraisers is an excellent resource for finding land appraisers who can provide an accurate value for farmland.
These experience appraisers look for all of the factors that we mentioned when determining the cost of vacant land.
Land appraisers should be able to quickly and accurately assess the value of the land and give you a fair and accurate understanding of how they came to their conclusions.
A local real estate agent who works with land might also be able to refer you to a land appraiser.
How Much Are Land Appraisals?
Are you wondering how much a land appraisal costs? The cost of a land appraisal is much more variable than a house appraisal.
Vacant land appraisals can vary in cost based on their complexity. If you’re buying a residential lot, the appraisal may only take a week and cost $300-$600. If it is a larger parcel, it can cost a lot more.
But commercial lots can take much longer to assess.
If you’re doing environmental studies or market research to ensure there’s enough demand for your business, you may have to wait a month or more for the report to be finished.
Environmental studies can cost between $2,000 and $4,000. Depending on the property’s location, you may need to secure a vacant land loan.
Real Estate Agents Can Give You Land Values
Like valuing a house, a real estate agent could also provide a comparative market analysis for your land. However, you will need to be more selective when choosing a real estate agent to value land.
It takes years of experience to be able to evaluate land values. Look for a real estate agent who works in the new construction end of the business to perform the CMA.
What Are The Benefits of a Land Appraisal?
The benefits of a land appraisal are significant. You can know precisely what you’re purchasing along with the approximate value.
Land appraisals are a vital part of the real estate due diligence process. A land appraisal can help you understand the worth of a property and what it should cost to buy it. It helps increase the odds you won’t make a mistake you’ll regret.
Land appraisals also have benefits you may not have considered, such as:
- Settling an estate
- Challenging high property tax assessments
- Finalizing a divorce
- Providing insurance coverage
- Setting an asking price
- Determining mortgage loan to value
What Are The Risks of Not Having Land Appraised?
Without having a qualified land appraiser assess the value of a lot or larger land parcel, you can easily make a significant financial mistake.
Buying land that is not buildable or will cost a fortune to develop could be a severe problem. Professional appraisers will ensure you’re paying fair market value for the land.
Final Thoughts
A land appraisal is a necessary process that helps ensure fair compensation for property owners. It is essential to know your rights and responsibilities as a landowner.
Getting a land appraisal done is important when purchasing any type of land. Professional appraisals provide a valuable service to both potential buyers and sellers. When you want to know the current market value of a plot of land, a licensed appraiser will be your best bet.
About the Author: The above Real Estate information on how do land appraisals work was provided by Bill Gassett, a Nationally recognized leader in his field. Bill can be reached via email at billgassett@remaxexec.com or by phone at 508-625-0191. Bill has helped people move in and out of many Metrowest towns for 35+ Years.
Are you thinking of selling your home? I have a passion for Real Estate and love to share my marketing expertise!
I service Real Estate Sales in the following Metrowest MA towns: Ashland, Bellingham, Douglas, Framingham, Franklin, Grafton, Holliston, Hopkinton, Hopedale, Medway, Mendon, Milford, Millbury, Millville, Northborough, Northbridge, Shrewsbury, Southborough, Sutton, Wayland, Westborough, Whitinsville, Worcester, Upton, and Uxbridge MA.
