How to Appraise Vacant Land
Appraising vacant land is a complex process best left to a professionally licensed appraiser in your state. There are many factors to consider in this process. How is the land zoned? How can the land be improved, if at all? What is its "highest and best use"? These are just a few of the questions you'll need to answer in determining its value.
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Things You'll Need
- Legal description of the property
- Property location (city, county, state)
Instructions
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Check with the governing body in charge of the Zoning Ordinance for where the property is located. They can tell you if and how the property may be improved, its maximum density and all of the requirements involved. For example, a property zoned "rural residential" requires a five-acre minimum lot size and can be improved with one single-family residence plus one additional structure.
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Generally speaking, land is usually categorized in the following ways: rural, residential, multi-family residential, industrial or commercial. There are different development guidelines for each property type. Knowing these guidelines is an important step in the valuation process.
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Take into account the fact that land with the highest allowable building density is generally more valuable. Therefore, commercial land usually has the greatest value while rural or agricultural land has the least. Residential or industrial land falls somewhere in the middle.
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Find recent sales of property similar to yours. Criteria include: zoning, location, size and physical attributes like topography. Use these sales as a comparison to determine a reasonable value estimate for your property. Vacant land valuations are usually made on either a price per acre or price per square foot basis.
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Analyze each sale to determine its overall similarity to the subject property. Give items considered superior to the subject property a negative adjustment and vice-versa. Determine the subject's value by the sale deemed most similar to the subject on an overall basis. The value should not be based on an average of the sales.
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Tips & Warnings
Appraising real property is an imperfect science. There are many variables to consider; and no property is identical to another. The complexities involved render it almost impossible for an amateur to tackle. The methodologies listed above offer a simplified way to approach appraising vacant land. However, it is really best left to a qualified professional appraiser.
