Knowing the value of your land is important for many reasons. It can help you estimate your property tax. It can also tell you how your asset has grown in value over the years. If you’re planning to rent out part or all of the land, knowing its worth can help you determine the right rental to charge.
Valuing your land is also an essential step in selling your property. You can use it to decide if the land’s present value is enough to give you a good profit. It’s also the first step toward setting the right selling price.
What is land value?
Land value approximates how much a piece a land is worth without any building or structure. Improvements to prepare the land for its intended use, such as better drainage, an irrigation system, landscaping, walkways, and others, are included in the valuation.
If your property has existing buildings like barns and sheds, it will be valuated based on a separate assessment of the land and the buildings.
Methods in valuing land
Professional appraisers value land for different purposes. Those who work for the county’s comptroller’s office do it to determine property taxes. Others are hired by banks and insurance companies to assess a property for sale in relation to a loan or insurance application. Private individuals may also get their services for their own reasons.
These professionals use various methods in determining the value of land. The most common ones are:
- Sales comparison approach
The selling prices of comparable land parcels in your area are used to establish the market value of your property. Your property will be compared to recently sold land – typically no earlier than two years – with similar sizes, condition, and features.
Special attention will be given to features that make your land more or less desirable than the comparable properties. The assessed value of your land will be adjusted based on these. For example, if a comparable land has a desirable feature like a river or creek and yours does not, then the value of your property will be assessed lower than the comparable.
- Land residual value
This method is commonly used by investors who are looking to develop a piece of land, whether for commercial or residential use. In this approach, the assessor starts by determining the highest and best use of the land. They then approximate the value of the development when completed, then subtract the costs involved in the development, such as construction, materials, and marketing costs. The balance between the value of the development and the cost for development is the “residual value” or the land value.
- The income approach
In an income approach, the appraiser considers the income a property would make if it were rented out. They will look into the market rent in the area and consider how much income similar properties are making. The land will then be valued based on its potential income. Some consider the land residual value method as one type of the income approach.
- The cost approach
This method is applied to land with existing structures or buildings. The appraiser determines how much it would cost at current prices to replace the existing building, including the cost of labor and materials. Depreciation is then subtracted. The figure arrived is added to the value of the land to determine the property’s value.
Pricing your land
The assessed value of your property should be your basis in determining a listing price for it. This doesn’t mean, though, that you have to list the land at this figure. Factors that enhance or reduce the desirability of the property should be considered as well. These include:
- Zoning
How is the property zoned? This will determine the land’s possible uses - Location
Is it in a good location with easy access to basic needs and amenities? - Inventory
What’s the inventory for similar properties? The more unique your property, the greater the expected demand for it. Features such as great views, easy access, and bodies of water can enhance your property’s value - Access
Does the property come with road access or an easement that allows unhindered access? Without this, your property’s market value can go down as much as 50% - Restrictions
Are there any restrictions on the use for the land, such as environmental or conservation laws? - Holding costs
If you hold on to the property, how much would it cost you?
Work with a real estate expert with experience in land
In Boise, you’ll find listings for land for sale by owner, and this could tempt you to take the same route. But unless you have the experience and knowhow, the complexities involved in pricing and selling land can lead to costly mistakes and lost opportunities.
Work with Realtors with proven experience in land transactions. First Service Group’s Chris Todd is an expert land planner who can help you in determining the highest and best use of your property and valuing its worth so you can sell it fast and at the right price.
Call First Service Group today at 208.343.9393 or email Chris(at)FirstServiceGroup(dotted)com.