by Laura Mueller
Getting a land appraisal is an important step in both buying and selling land, since it provides both parties (as well as the bank) with an accurate idea of what the sale price should be. But how do land appraisers figure out what land is worth?
Like with residential real estate, appraisers look at a number of key factors to price out a piece of land, including its features, condition, and how it compares to the properties around it. However, appraising land does have some unique differences from appraising a home, and it can be helpful to know what they are if you’re getting ready to sell—or if you’re a buyer trying to get a land loan.
Here’s what to expect during a land appraisal, including the unique factors that appraisers take into account.
The Land Appraisal Process
A land appraisal generally takes anywhere from two weeks to two months, depending on the availability of an appraiser and the size and scope of the property.
The goal of the appraiser is to determine the maximum price and use potential of the land. This determination takes into consideration what the land is currently used for, as well as how it could possibly be used in the future. A large piece of vacant land, for example, may be worth well more than it appears at first glance if it’s suitable for future residential or commercial development.
A thorough appraisal is done in a number of steps, starting with research of the property and its surrounding area. What is it zoned for? Are there any major restrictions on the land? Is it in a flood zone? All of these considerations are essential for an accurate appraisal, even before an appraiser sets foot on the property.
Next up is a physical inspection. This inspection, plus the previously-completed research, is how an appraiser will figure out what the best potential use of the property is.
This will be followed by looking at comps, which the appraiser will use to make adjustments to the land’s value based on similar properties around it.
Last is an appraisal report. This tells the buyer, seller, and the bank what the true value of the property is assumed to be—and why.
Factors That Affect Land Value
An appraiser takes many factors into account when pricing out land, including these three big ones:
• Usable acres – Not all acres are usable acres. An appraiser will look beyond the raw acreage of a property and figure out how much of the land can actually be utilized for its maximum use purpose based on topography and zoning, among other things.
• Location – Better locations equal higher prices. If the land is located somewhere with a lot of promise in terms of profit or use potential, that will play a large role in determining its price.
• Improvements – Improvements, including utilities and access roads, drive up the value of a piece of land. This is understandable, since these are high-cost features that often must be put in place in order for the land to achieve its best use.
A comprehensive appraisal is always a necessity. Before you list land for sale or close on a land deal as a buyer, get one done so that you know the price of a property is in line with what it’s really worth.
Like this article? Please feel free to share or post a link on your site: https://www.landhub.com/land-news/what-to-expect-during-a-land-appraisal/