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How to Value Land for Sale?

April 24, 2020 Land For Sale

How to Value Land for Sale?

Why are 100 acres in one county worth double 100 acres in another? How do people come up with the asking price for their family farm or long term investment property?  There are a lot of factors about the land to take into consideration when selling or buying land to make sure it goes for fair market value.  Every seller wants to get as much as possible, and buyers wish to make sure they get the best deal they can.  In either situation, the process is the same; compare similar properties, consider location, and consider land features.


Start by taking a note out of the local property appraiser's workbook, find out what other properties in the area have sold for. This will give you real-world examples of what other people are paying for land.  It is essential when you are looking for properties that you look for properties that have sold as recently as possible. Properties that have sold within three months would be preferable to make sure there hasn't been a significant market change. .  The land also usually follows the buying in bulk rules of other industries, so you need to look for similar-sized properties. It's not a safe assumption to find a 1-acre property that sold and multiply by 100 to discover the value of the 100-acre farm you are researching. Ideally, you would find a few recently sold similar properties and use the average sale price as a baseline for pricing the property in question.


Next, you want to consider the location of the property.  Is it close to a major city? Is it in an excellent commercial location? Is there much land left in the area? Anything that can make the property more desirable will raise the price.  If the 100 acres in question is 20 minutes from a major city, and the properties you used to create your baseline are an hour past that, the price goes up.  Would a large manufacturer want to develop the property, or is it only suitable as a hunting property? Large companies will spend more on an excellent property than most hunters would.  Check the zoning of your properties' location.  If it must be used for residential purposes, then you may not get as much for it.  While all land is valuable as there is only a limited amount of it, the location can make your property's price soar or bust.


The last important factor to consider is the features of the property itself since many features will raise and lower the price of the land. Is there a lake or river on or bordering the property? Is there an incredible view of the mountains? Are there valuable trees near maturity that could be sold? Is the property suitable for development? Does it include farmland that has already been prepared? Any of these land features would raise the value of the land compared to property without. Similar to features that add value, some can take away from it.  Is the property a swamp? Is the property unsuitable for plant growth? Are there massive elevation changes on the property, making it difficult to navigate? Is the property a part of a mitigation bank, or is there a restriction on how it can be used? Anything that makes the land less appealing for a new owner will take away from the overall value.  If you're a hunter, this could work in your favor as you can buy the land for less money than you could a highly desirable property.


So starting with your baseline price you acquire from your research, you can add or take away value based on the location and features of the property.  While there is no set value add of a property having a lake, or being near a city, you can still get close to the correct value of the land.  It is also important to remember that property is only worth what someone is willing to pay for it.  As a buyer, you can use this to your advantage when negotiating. The owner may be asking more than they should, so be patient and make an offer for what you are willing to pay.  The same goes for the seller. You may have calculated a fair price for your property, but someone may want it enough to pay more for it, so listing it higher may put some extra money in your pocket.