Tips on Purchasing Wooded Acreage

Residential homes in suburban neighborhoods are fairly easy to value--the supply is stable and the market is active. With other types of property, such as wooded acreage, it's not as clear what the best use of the property is and comparative pricing is not as simple. It's also not always clear what uses are permitted on the property or what the financing options are, if any. Even if you know what you want to use it for, understanding it's other uses and restrictions as well as methods of financing it will ensure you have an asset someone else will be willing and able to buy in the future.

Scope of Land Use

Nearly every square foot in the United States is subject to land use restrictions. Areas inside of municipal boundaries tend to have well-defined guidelines for building and use, and there is often wooded acreage inside of urban boundaries. As you move out into urban area reserves and county-governed land, rules change. Do not assume you can build whatever you want. Building on most land is highly regulated. Certain activities such as running a business may also be prohibited.

Understand the "Best and Highest Use"

The "best and highest use" is phrase often used by commercial and residential appraisers. Of all the potential uses of a property, it identifies which use extracts the greatest economic value from the land. It's an important concept because property, regardless of its current use, is generally valued by its "best and highest use". So, if you buy a ten acre treed parcel for family camping trips, it will be more valuable if it is can be subdivided and built on. It doesn't matter if you intend to; it will be more valuable if it has that potential.

Understand Utilities and Services

Understand what utilities are currently available and what "off-grid" potential there is. Many wooded parcels have all the utilities available in a city: water, sewer, electricity and natural gas. Some have none. Know if the utility runs to the property. If it does not, know where the nearest utility is. If it is not practical to bring the utility to the property, understand the potential alternatives. Find out if a soil engineer will approve the property for a septic system and if there are renewable power sources such as a creek. Evaluate the property for solar and wind power.

Timber Value

If you are interested in property for one specific use, such as recreation, you may not consider other uses or valuation approaches. Just as people are unlikely to consider the value of a tree in front of their house to to a lumber mill, recreational buyers may not consider the commercial value of a treed parcel. Again, it doesn't matter if you intention is to do anything but camp on the land. Knowing if you the actual trees have commercial value and if so, how much, is prudent before you make your purchase.

References

• Pennsylvania Forestry Association: West Virginia University: How to Estimate the Value of Timber in Your Woodlot
• Uniform Appraisal Standards for Federal Land Acquisitions: Highest & Best Use: Real Estate Appraisal and Valuation Issues
• For Dummies: Understanding Zoning, Licensing, and Permits
• Buying Off Grid Real Estate: Rural Land and Homes for Sale: Living Off The Grid