by Laura Mueller
Home sellers have it easy when trying to figure out how much their property is worth. On-the-nose comps are generally easy to come by, and there are plenty of online tools that can provide a general estimate based on a home’s square footage, bed and bath count, and other main features. The same isn’t true for those trying to sell land (or just trying to figure out the value of a parcel of land for investment or other purposes). If you’re asking how much your land is worth, you’re going to have to dig a bit deeper than an online calculator.
The key to accurately determining the value of your land is to tackle your query with the help of an experienced land agent. Chances are, there is an agent in your area who is familiar with pricing and selling vacant or built-on lots, and he or she will be your main source of information and guidance.
There are three main approaches used to assign value to land:
The market/sales comparison approach tells you how much your land is worth in comparison to similar properties.
The income approach tells you how much your land is worth based on the amount of income it can reasonably expect to generate.
The cost approach tells you how much your land is worth if you were to construct the same buildings on it, starting from scratch and based on current building costs.
The approach or approaches applicable to your property depend on the type of land you’re selling and what its purpose is. For example, vacant land doesn’t generally generate any income, nor does it have existing structures by which to apply the cost approach, so you’re probably going to be relying primarily on the market/sales comparison approach. On the other hand, if you’re selling land to a developer, all three approaches may come into play.
One factor that makes it especially difficult to quantify the value of land: comps can be hard to come by. Depending on where you live, there may be a limited number of comparable sale lots to look at, and those lots that do exist may vary greatly in terms of size, scope, purpose, and improvements.
There’s no exact science to determining how much your land is worth. Ultimately it’s going to be worth what someone is willing to pay for it when you go to sell, which is a frustrating answer but the only true signifier in such a diversified and limited market. Once again, your best bet for assigning an accurate value to your land is to work with someone who has expertise in buying and selling similar properties. Look for both an agent and an appraiser with significant experience in the land market, and be sure to have a clear idea of your land’s zoning and usage restrictions. The more you know about the current and future possibilities of your property, the better you can figure out what it might be worth to both the market and to someone else.