Uncovering the Market Value of Vacant Land: Part One

When you have made the decision to invest in land, the most difficult issue that arises is finding the right land to invest in. First, you need to be certain what you want the land to be used for. Will your property be a future community development site? A ranch? A private home? Once you have ironed out that issue, the process of buying land brings one more obstacle your way – discovering the “market value” of the land.
The problem at hand, especially for the uninitiated real estate investor or first-time land buyer, is uncovering the “true” value of land that does not have typical valuation standards.
Of course, there are many factors that go into finding the valuation for a piece of land. Comps, also called comparables, are used to determine the value of a property. Information is gathered, analyzed and compared about recent land transactions in the area including the price, the land’s features, and the size of the lot to produce an estimated value of the raw land for sale.
Herein lies the problem with nailing down a solid final number for land appraisal. While comps are easy to come by in the housing market, with a land purchase, investors must gamble on the land’s potential value, a risk factor that can send self-represented land investors screaming for the hills. They needn’t lose faith in the valuation process, though. There are ways to determine a land’s worth that provide investors an accurate number to work with so they can have confidence that the property they are purchasing is worth what they are paying for it.
To do this, the land needs to be appraised. An appraiser is an outside source hired to assess the value of a lot or land, and they do so through contemporary, but not entirely flawless, evaluation methods.
There are three typical approaches to a land appraisal. These methods mirror typical real estate evaluations and can be used solely or combined to determine a piece of land’s value. As you will see, with raw land in an undeveloped area, it can be incredibly difficult to glean an accurate value from these appraisal methods.
Cost Approach
For standard real estate, an appraiser would use a cost approach to determine how much it would cost to replace buildings on the land or replicate a rebuild from the ground up. This type of approach does not help the investor looking to invest in raw land that does not have existing buildings or an established community around it to compare prices against.
Income Approach
The net operating income (NOI) can be determined by investors who are interested in purchasing land for a commercial investment. The appraiser would need to examine similar properties and their current market value to determine the best uses for the land to earn the highest profit, whether that be as a commercial property or a new community of private homes. Again, as a person interested in purchasing a single piece of land to build a single home in which they plan to live, an income approach is not an especially useful method of discovering value on its own.
Sales Comparison Approach
The most reliable way to determine the ballpark value of land is to look at previous, similar land purchases in the area and their sale price. With this information, size of land, topography, location, access, and community features can be compared to determine a price point.
It should be no surprise at this point to see that a different approach is needed to determine the real market value of a parcel of land, and that is why investors and independent buyers look to land site professionals to help them determine not only the value of the land they want to purchase but if that is the right land to purchase for their needs.
There is a whole lot more to cover about how to uncover the true value of land, so check back with us for part two when we’ll discuss what gives land its value – and how you can feel confident knowing that you’ve made a sound purchase.

Land & Lot Reports


1926 Circle of Excellence for 2020 2017 2019 land report 2020 economic projections 2020 economy 3 Benefits of Planting Native Vegetation aerial allure of land Apache Junction architect area Arizona arizona activities arizona eating Arizona economy arizona events Arizona home owners arizona land report Arizona living arizona real estate arizona realty arizona restaurants arizona summer activities arizona summer events backyard benefits of planting native vegetation best golf courses best golf courses in Arizona best golf courses in Tucson best hikes in tucson best hiking best hiking trail of Tucson best hiking trails best home decor best home details best housing markets best lights best night lights best night time lights best of Tucson best real estate best real estate market best takeout in Tucson Bisbee blueprint blueprints breweries breweries in Tucson Arizona buildable builder building building a home building house built-in desks built-in details built-in shelves burger buying homes buying land buying land in Tucson buying real estate buying real estate in tucson buying Tucson lots carpet change order cinema room classic car construction construction loan construction permit construction plan construction plans cooling coronado forest cost country custom home building custom homes deed restrictions desert garden desert gardening design design guidelines design guidelines for a Subdivision Development diy home improvement dream home dream kitchen easements eatery eating eating in tuscon economic outlook economic projections economics elevation energy efficient events film festivals film festivals in Tucson fireplace flood flood insurance floodplain Flooring food food tours foreclosure geologic language golf courses golf courses in Arizona golf courses in Tucson gps habitat health heated floors heating hidden room hikes hiking historical hobby room holiday events home home blueprint home blueprints home builder Home building home decor home decorations home details home improvement home owners home plan home size house house blueprints house details houseplants housing markets how to buy how to buy land how to make your neighborhood safer hvac industrial style interior design internet internet in Tucson internet providers in Tucson laminate land land parcel land report land use land use in Tucson land zoning living in Tucson loan program lot lots man cave March 2024 land report march land report measurement mexican minimalist modern mortgage movie bluff movie room moving mudroom national park native vegetation neighborhood new home new year night lights non-invasive plants Old West organization packing permit permit needed permits preventing erosion property property in Arizona property in Tucson property listings property report purchasing residential land real estate real estate in Arizona real estate market real estate report realtor tucson recessed light remote work remote work in Arizona remote work in Tucson remote working residential land resolution restaurant riperian riperian habitat rooms run rural Tucson safe neighborhood salad sales salt lamp Scottsdale selling real estate slope spa spa room specialty rooms steak stone style subdivisions Summer summer activities summer events sun exposure takeout Technology theatre things to do in arizona things to do in tucson things to do in tuscon topography travel traveling Tucson Tucson 2020 economy tucson activities Tucson Arizona tucson christmas Tucson economy tucson events Tucson home owners Tucson housing market tucson land tucson land for sale tucson land loans tucson land report Tucson lifestyle Tucson living tucson lot loans tucson lots tucson mountains Tucson national parks tucson real estate Tucson real estate market tucson realty tucson summer tucson summer events Tucson vegetation tuscon land report unusable land Upgrades upgrading your home upgrading your interior useable land vacant land vacant land design guidelines vacant land guidelines vacant land tucson vacant Tucson lots vacation vegetation views vintage walk warranty Wash what to do in Tucson where to eat where to eat in Arizona working in Tucson working remote in Tucson working remotely zip codes zones zoning

Sign Up for News

Sign Up

Featured Listing