If you’ve begun googling around about selling your land, you may have realized that putting a price tag on your property isn’t the easiest thing in the world. Depending on quite a long list of different factors, the cost of an acre can vary tremendously.
For example, location is one of the obvious factors that can influence the price of land. The average cost of an acre of land in the state of Wyoming is less than $2,000 an acre, making it the cheapest state to buy land in the contiguous U.S. On the other end of the spectrum, the average cost of an acre of land in New Jersey, the most expensive state, is a whopping $196,410.
If your goal is to sell your land fast for top dollar, determining how much your land is worth is essential. Pricing your property right will have a big impact on how quickly you’ll start receiving offers that work for you. Over price your property and it can sit on the market for years.
We’ve all seen the roadside signs and billboards advertising land for sale that are old, sun bleached, and weather worn. These owners have tried to get rid of their land for decades and couldn’t find a buyer because they were asking more than a willing buyer would pay.
Are you wondering “how much is my land worth?” Let’s take a look at how you can find out the value of your vacant lot on your own.
If you’re planning on selling your property on your own without a real estate agent, then determining a reasonable value for your land is one of your most important jobs. It will likely be worth your time to try a number of these different methods to ensure that you are getting the right price.
Gather Information
To start, you might want to gather some of the documents and other details about your property. These include:
- The survey or plot plan showing the exact acreage
- The title report, which you can buy from a title search company
- The most recent tax bill, which you can acquire from the County assessor’s office
- The legal description which can be found at the County Recorder of Deeds or on the deed when you purchased
- The current listing agreement if that is applicable
- If the property is in a flood zone that will require any future homes to have flood insurance or prevent development altogether
- If there are any zoning restrictions and the current approved land use
- If the parcel has a legal access easement and road access
- What the highest and best use is in an ideal situation
- Whether there are any improvements (fencing, well, barn, etc.)
All the items will be useful for you in finding an estimate of how much your land is worth.
Methods Appraisers Use to Find Land Value
Most people will tell you to start with an appraisal to help you determine value. There are two primary methods that appraisers use to calculate the worth of a piece of property or land. Let’s take a look at these three different methods to give you a sense of how a professional goes about it. You can then use this knowledge to follow the same steps and do it yourself.
Cost Approach
This method is not used as often to estimate the value of unimproved land. It is mainly for properties with a house or other large improvements. Having buildings on a the lot will obviously massively affect the value. What kind of shape the buildings are in will also affect the value. For example if the property needs a major renovation
Since we are here to discuss how to estimate the value of land we won’t get into too much detail on this method.
Are you interested in learning more about the cost of land in the U.S.? You can learn more in the USDA Land Values 2019 Summary
Market Approach Using Sales Data
The next approach involves finding comparable (comp) real estate sales data for your vacant land. You will want to look for recent sales that are as similar to yours as you possibly can. This is the most common method an appraiser will use for a house and it can translate to land.
What Makes A Good Comp?
If you have a 5 acre vacant lot then the ideal comparable is other recent sales of 5 acre vacant lots with the same zoning as geographically close as possible to yours. You can’t compare a 5 acre property to larger lots that have 10 acres or more.
You will also want the sales to be as recent as possible so that they reflect what is going on in the current real estate market today. Sales from a year or longer ago aren’t that helpful.
To get a good valuation, you will want to find at least three to five sales that are comparable to yours in recent times (sold in the last couple months ideally).
Then, you can make adjustments to these sales you found that were similar to your property. You will need to determine the different variables that have an impact on the value of the land. These include things like access, zoning, parcel size and shape, and topography. You can then adjust each of the comparable sales for the ways that they differ from the lot you are selling.
Cost Per Square Foot or Per Acre Of Other Land Sales
Finally, it’s time to determine the cost per square foot of these similar sales. To determine this, you will want to divide the sale price by each of the properties’ total square footage.
For all of the comparable sales, you will want to find the median or average cost per square foot or per acre depending on the size. Then you can take the total square footage or acreage of your lot and multiply it by the median or the average land prices you determined. The figure you end up with is the valuation of your land based upon the market approach to appraising land.
Are you curious about how property values have changed over time? If so, take a look at this article.
Income Approach To Land Value
The income approach for locating values works best with income-producing properties such as rental properties. Most empty lots however make little income. Only parcels of land leased for agriculture and recreational uses, such as hunting, produce predictable income.
If your land is or could be used to generate income, you can use this method to pin down the real estate value. This is most often the case with farm, timber, and agricultural land.
Net Operating Income and Capitalization Rate
If you’re looking into how to sell land that you’ve been using commercially, you can start by calculating the current net operating income (NOI) of the land. Buyers want to get an idea of what kind of return they can get on their investment.
Now it’s time to find the capitalization rate. This represents the rate of return on investment for the investor. You will first need to calculate the cap rate for similar properties in order to find the cap rate for your real estate. Commercial brokers can help give you an idea of these numbers. You can also look at other commercial websites.
Once you have found accurate estimates for similar properties’ net operating incomes, you can then divide each properties’ NOI by its most recent sales price you can find. This will leave you with the capitalization rate.
To calculate the cap rate for your own tract, you can take the average cap rate from the comparable properties and use it in your own calculation.
Finally, it’s time to divide your land’s NOI by the comparable cap rate you calculated. The figure you end up with is your land’s value based on this method of appraising land. This strategy requires a lot of data that isn’t as readily available.
Are you wondering what it takes to find a developer to purchase? If so, you can learn more here.
Hire A Professional Appraiser To Estimate Land Worth
One easy way to nail down the value of your land is to obtain an appraisal report. You can find an appraiser by either looking online or in your local phone book. A realtor might also be able to point you in the right direction in finding a professional appraiser.
You’ll want to ask the appraiser about what they charge for an appraisal before you hire them for a job. Depending on the size of the property and how much work they have to do it can cost anywhere from $300-$5,000. You can and should ask for a quote in writing before hiring them.
It’s worth understanding that it typically costs more to appraise a piece of land than it does for a building because more extensive research is necessary for land appraisals. There is less access to information available so it requires more work for the appraiser.
In addition to these items you provide, the appraisal will use a sales comparison approach like we discussed earlier. If you have a vacant lot, they will try and find recent sales for other similar lots in the area when valuing your land.
Undeveloped land will not be worth as much as a commercial development obviously. But there are many factors that play into property values that might not be as obvious like whether the lot is next door to loud and rude neighbors or whether the back of the lot has a steep incline.
Once you receive the appraisal, you will find it full of information about the property and the appraisers process for valuing land. This document should also have an explanation for how current market conditions were investigated by the appraiser.
Coming up with a current market value is both an art and a science and even the best appraiser cannot tell you exactly what your property will go for. Only a willing buyer can do that.
Speak with a Real Estate Agent
Another way to work to find the value of your land is to ask a real estate agent or a land broker how much your land is worth. You can do a search for “land agents near me” or “land real estate agents near me.” You don’t necessarily have to sign on with a real estate agent in order to benefit from some of their expertise.
However, you’ll want to find a reputable and experienced real estate agent or land brokerage if you are going this route. Selling vacant land isn’t the same as selling properties with residential or commercial structures on them. So make sure you find someone who has a lot of experience selling vacant lots and has good feel for the market value of land.
Check Their Credentials
Before you have an agent come out, make sure that they are well-versed in the market of undeveloped or vacant land. If you don’t do your due diligence, you might end up wasting your time with someone who doesn’t have any more of a clue how much your land is worth than you do.
What is your first impression with them on the phone – do they answer the phone and are they present and attentive? Look at their personal and brokerage websites. Do they look professional and do they have reviews from other sellers? Ask them if they are familiar with the location of your lot. If you are in an area with a lot of timber land, have they sold timer property before?
It’s always a good idea to talk to more than one agent, too. This way, you can compare their different value estimates.
The Downside Of Vacant Land Real Estate Agents
The downside of this is real estate agents aren’t necessarily looking out for your best interests. First, they are often well versed in home sale prices but less familiar with land. Second, many times they will tell you what you want to hear and quote you a value that is often times not attainable in the market. Then after you have signed a listing agreement and the property has sat on the market a few months they’ll tell you its overpriced and you need to reduce it to find a buyer.
Land Value Calculator
You can also find land value calculators online. However, you probably only want to use these to give you an idea of a ballpark figure rather than assuming it is giving you an exact figure for your land’s worth. They might not factor in a number of important considerations.
These calculators are also heavily geared towards agricultural land and don’t work for other types of land.
(The U.S. has nearly 1.9 billion acres of land. Wondering how most of it is used? Check out this news story.)
County Assessor’s Evaluation
The assessed value is the basis that Counties use to calculate your taxes. In more urban areas the assessor will reevaluate the property every year. In rural areas it will be much less often.
The county tax authority has multiple ways to determine the value of your property such and it varies from area to area. Some will use more of a sales approach, others will jut use the last recorded sales price from the previous transfer. The valuation they come up is probably one of the most unreliable methods.
How Much Is My Land Worth To A Ready and Willing Buyer?
When it comes to land, there are no easy answers. As any real estate appraiser will tell you – Valuing an unimproved piece of property can be nearly impossible. And at the end of the day – an appraisal is just that. Its an estimate of what your property is worth. Not the price a willing buyer is going to pay for your property today.
When I ask myself how much my land is worth I use the above methods. I have bought and sold a lot of real estate over the years and finding land worth is not an exact science.
At the end of the day the price a buyer is willing to pay and the price you are willing to sell at is the true measure of how much your land is worth.