15 WAYS AN APPRAISER DETERMINES LAND VALUE

 

Below are some of the most important factors a property appraiser considers when determining the value of a property. They can be applied to any land, whether a sprawling private island or a humble 1-acre lot. For land buyers, these factors can help you know whether a property is fairly priced, and to recognize the pros and cons of the land you are considering.

1. Access

Land real estate experts will tell you access is a key factor in evaluating the marketability of a property, because - no matter how great the property is - its use is limited when it’s difficult to reach. When an appraiser appraises a property, they ask themself a series of questions about access:

• Can the property be accessed by a nearby road, or is it landlocked?
• If there is access, is it legal access?
• Is it public or private?
• Is it graded or paved?
• One-sided or multi-sided?
• Is the road maintained by the local municipality, or will the owner have to maintain it?

All of those factors can influence the property’s value. In fact, some lenders will not approve a loan for home construction on property with private road frontage that doesn’t have a maintenance agreement.

2. Topography

An appraiser looks to a property’s topography in determining its use potential. For example: A historic wetland that has been altered may be ideal for environmental wetland mitigation. Swampy land may not work for building, but could be ideal as hunting land. Sandy soils may limit the silviculture potential of a property. Certain properties would be ideal for development - and certain properties wouldn’t. An old sinkhole or a unique ravine system could add value because of their beauty. An appraiser thinks about all the possible uses as he visits the property and studies topography maps of the land.

3. Amenity features

Does the property have special amenities that would make it more valuable from an aesthetic appeal perspective? Perhaps there is a waterfront or a beautiful view.

Generally these features will be a positive factor. The only time they’re not is when their existence impairs in some way the use of the overall property.

For example, if a large river cut off access to the majority of a property, it could limit the land’s use potential.

4. Configuration

The way a property is laid out can have a big impact on value.

An irregular or narrow layout could limit the use potential or overall management of the land. For example, a long, narrow tract’s layout may not allow room for large equipment to come in and clear trees or install a septic tank.

How does the layout affect hunting, timber management, development potential? Does it create problems, such as making it more vulnerable to trespassers?

An appraiser takes all of these factors into account when looking at a property’s layout.

5. Wildlife

Just as a hunter looks for evidence a deer or other game has been on the land, an appraiser looks for clues that will help them understand what kind of wildlife is on a property.

There may be deer tracks, rubs or sheds, but that is just the beginning. An appraiser will also look for variations in vegetation and topography that lends itself to supporting a diverse array of wildlife.

Does that already exist, or would you need to develop it and manage it into place?

6. Location

As the old adage goes, location is one of the most important factors in real estate.

If you put the same property in two different places, they may have entirely different uses,

For example, a 500-acre property near a city might have development potential, while that same property would be more suited for timberland in a rural area close to a mill.

If the property has the potential to be used for homes, is it close to schools, conveniences, jobs? What are the taxes like in the community?

Those are factors an appraiser will consider about a property’s location.

7. Size

Just like buying products in bulk can make them more affordable, acreage sold in larger amounts is typically lower in price-per-acre than smaller tracts.

An appraiser will consider the number of acres overall while appraising the land. But they will also consider the demand for a tract of that size. Are there people in the community who would want 1000 acres?

The demand for different sizes can vary from region to region.

8. Improvements

Enhancements added to properties can make them more valuable, depending on the market. For example, in some markets, hunting land with an elaborate lodge would greatly increase in value over land without a lodge. In other communities, the investment into the lodge may not bring the landowner a good return on their money.

When the improvement enhances the true use potential - and the buyer’s understanding of the use potential - of a property, that increases its value,

9. Historical Management Practices

The history of how a property has been managed can impact its value.

For example, if a hunting property has been managed for wildlife for many years, it would be more valuable than a hunting property that has not because it will likely have a more robust population of game to hunt.

Timberland that has been under the stewardship of foresters for decades would be more valuable than pines left to grow without any management or maintenance.

The same types of considerations could be taken into account with agricultural land, recreational land and other properties. An appraiser looks both at what the management practices were, and how long they were in effect, to understand how they influence a property’s value.

10. Soil Characteristics

An appraiser reviews published soil surveys to determine whether a property’s soil matches particular uses. They will  consider whether it lends itself to growing certain crops, if it’s suitable for development, or if it would require extensive excavation before it could be used.

If the soil is optimal for whatever land use is in demand in the local market, that can increase the property’s value.

11. Land Use and Zoning Requirements

Land use restrictions and zoning requirements are critical factors that dictate what the land can and cannot be used for.

Key questions an appraiser considers are:

• Does the property’s zoning limit its use potential?
• Do restrictions on the land limit how it could be subdivided or developed?
• Is commercial use allowed? Residential? Agricultural?

Zoning varies from county to county.

In some counties, agricultural zoning means you can only build one [home] per 20 acres. In other counties, it’s one per 100 acres,

Sometimes, if the market is ripe for a certain use, such as development, an appraiser may also consider how cumbersome it would be to get the land use and zoning restrictions changed.

Zoning does not in and of itself create value. For example, if a Florida property was zoned to allow ski slopes, that would not have any value because the Southern state has no potential for ski slopes.

12. Easements and Encumberances

A property’s value can be affected by easements and encumbrances that may make some of its land unusable. Land on the property could have an easement for a power line, a walking trail, water or sewer utilities, drainage, flowage or conservation.

13. Surrounding Land Uses and Area Market Trends

Neighboring properties could enhance a particular use for the land - or impede it. For example, there would be issues putting a gun range next door to a school.

What is being done with nearby land may also be an indicator of where the market is headed. Are properties transitioning from farms and timberland to residential properties or developments? That can help determine the land’s potential uses.

14. Timber Characteristics

Are there trees on the land? Can the trees be sold as timber, do they have little timber value and need to be removed, or do they have an aesthetic appeal?

If there are pine trees on the property, did they grow there naturally, or is it a planted pine plantation?

If the trees can be harvested and sold as timber, an appraiser has to consider the current value of the trees, as well as the future value. For example, 10-year-old timber would have a lower value if harvested immediately than if it were given another 10 years to grow.

An appraiser also considers the timber market, itself, when determining the marketability of a property’s timber.

15. Floodplain Issues

Using flood maps and observing the property while on site, an appraiser evaluates whether the land is prone to flooding. If the appraiser sees green algae growing at the base of many of the trees, or if there is little vegetation on the forest floor, he knows the area is probably flood prone.

And that’s just the beginning. If the land is prone to flooding, an appraiser will want to know:

• Where it happens on the property
• How often it happens
• If it has velocity and wave action
• What impact it has on the use potential of the property

Please feel free to contact the Rural KC Team-Keller Williams Partners for any questions you might have or if you are interested in buying and selling rural property.