How are Land Properties Appraised?

Home » How are Land Properties Appraised?

Land appraisal is a complicated process that determines the value of vacant land. Since land properties always retain some value, easy to liquidate, and serves as a long-term asset for any business, the determined market value of land has to be as close to accurate as possible.

Land properties are valued differently from real estate properties for sale, such as homes, condominiums, and commercial properties. With no construction materials you can quantify and add to its value, land appraisal has to rely on other valuation approaches for pricing.

Real estate agents appraise land properties based on the following criteria: zoning and land use, results of a land survey, value as compared to similar-sized lots in the market, and its income potential.

Zoning and Land Use

One definite way to appraise land is to look at its intended use and zoning. A land property’s zoning affects its land use; it has restrictions that dictate the utilization of land.

Zoning and the corresponding value of lots depend on the county and its laws. In most counties in the country, commercially zoned lots price higher than residential lots. This is because commercial lots can produce properties that bring in income.

Known as the Net Operating Income, this contributes to the overall assessed value of commercial properties. Investors look for at least a 10 percent return on investment when purchasing land, this figure already included in the net operating income of every commercially zoned lot.

Residential lots, on the other hand, are specifically for the purpose of building houses on for people to live in. These don’t produce income the same way commercial lots do, so the price is significantly lower.

Land Surveys

Workers surveying the landLand surveys determine the exact borders and parameters of the land. Real estate appraisers usually obtain the legal description on the lot’s tax record, informing them of the exact perimeters to conduct a survey on.

After determining the precise measurement of the vacant land, the appraiser goes to the property itself and performs an on-site survey. They mark the boundaries of the land and calculate the area for sales information.

Aside from size and border, land surveys also determine the state the property is in. The quality of land affects its value. Not all lots contain the same type of buildable material, and some might need improvement more than others do. Lots that require less work sells at a higher rate than lots that don’t.

Comparison-based Assessment

In a comparison-based assessment, appraisers review and compare the prices of recently sold lots within the same market as your vacant land. These lots compare your land in terms of size and location, and function as a reliable indicator of the current market value of vacant lots in your area.

This is the easiest method to use to determine land value, though a downside to this method is that there aren’t enough comparable land properties in the area to draw a conclusion from. A lack of recent data won’t accurately reflect your land’s market value.

Other factors that affect the value of your lot are: accessibility, topography, amenities, and the development potential of land. Residential lots located near school districts have a higher market value than lots located far away from one. Vacant land near amenities, such as bodies of water are considered value-adding, and therefore worth more.

The market value of vacant land relies on location, size, quality, income potential, profitability, and on the prices of lots sold before it within the same market. A thorough appraisal of land is important, as it is an investment that only increases in value.


Real Estate Redefined.

Scroll to Top