Appraisal methods for land value<<>> For all methods, the sales comparison approach works best here too. This is when the appraiser looks up land sales in public records or in the MLS to determine the value of the land. This is the most accurate when land sales are available, but many times, in developed neighborhoods there are no land sales available. In older developments the appraiser can use different methods to come to a conclusion of the value of the land. Land value and older development with limited land sales1. They will look at new home sales in the area and prior sales history to see what the most recent prior sales history is for newly built homes. This takes a lot of research, because the appraiser must first find new homes and next look up the prior sales history for each of these sales to see if there are any land sales. This is an accurate way to determine the value of the land, but the appraiser must be sure that the land was not purchased at a discount via a wholesale builder.2. Find homes and subtract the improvements and depreciation from the homes. What's left is the value of the land. This doesn't work very good, because determining depreciation is just a guess, so it may not be as accurate, but used with other methods, may give the appraiser a good value range and a fair value for the property. 3. Find land sales from a competing development with the same types of homes and similar market area. This works good for many places. While the land is not located within close proximity of the subject, many market areas will share similar land values, regardless of the location. I've found that if they offer the same vintage, design and appeal of homes and similar schools in the area, the land values will be quite similar in most cases. Newer subdivision and limited land salesIf the home is located in a newer subdivision and there are limited land sales because the builder's are buying them and building homes and selling the homes and land as a package deal to the buyer, the prior sales history will shows what the land was sold for. In some cases, the builders will buy the land wholesale and sale the land retail to each individual with the home. This makes it tricky to confirm the value of the land, but it can be done.Sometimes there will be a separate lots in the development that will have for sale by owner signs. This will give the appraiser a good idea of the listings of land sales in the area and help guide the appraiser toward a reasonable value for the land. Many times the appraiser can just look in MLS and find land sales that are being purchases by home owners and builders. This information is recorded in MLS and is the easiest way to determine the value of the land, but in some cases, the land is not sold via the MLS. If the appraiser can't find sales in the MLS, they will just dig through public records and look for prior sales history. What they're looking for is recent prior sales history of newer homes that have been built in the area and recent sales history of transactions that are prices around what the land value might be. With a little research, they'll find three to ten or so of these types of properties. Once the appraiser looks at enough of these, they'll get the fuzzy feeling that they've got the correct value of the land. |