The most common question I get working in real estate, and more specifically the land business every week is, “What’s land going for these days?”
This is not only the most common question I get but also the hardest question to answer accurately if asked in this very general fashion for a fairly broad area on the map. My reply typically begins with, “Well, that all depends on a lot of factors really.” I realize that people don’t want to hear that, they really want you to just throw out some raw average number and take your best stab at a price that they would like to hear. But unfortunately, in the land sales industry, it just doesn’t work that way. There are way too many factors and various details that come into play when determining what a particular piece of property is worth.
For example, I primarily cover five main counties in my land sales region. From the center point of these five counties, you can drive to the furthest outer boundaries of these counties in about in about 60 minutes.
I have seen almost the exact same type and size of property sell in County B for anywhere from 2 to 10 thousand dollars more per acre than it did in County A. That is not even some small commercial lot that we’re talking about, that’s for larger rural land tracts.
I’ve also seen a situation where certain factors come into play, and a property in County A will sell for more per acre than a similar sized property in County B. Even though the “dirt value” may be much, much higher in County B, the County A tract may have other things adding to its overall value, making it sell for a higher price per acre.
These other things I am referring to that add value to the property do not just include houses or other buildings, as I feel like that is an obvious situation for most people to understand. We all know that the right dwelling sitting on a particular piece of land could most certainly add substantial value to a property’s overall price per acre. I am not going to discuss the obvious, this is to remind you of other important factors to consider when determining land value.
As an example, one of the more common factors to take into consideration is timber value. The timber on a certain parcel can add a lot of value and thus greatly affect its overall price tag. Markets vary, and change, and the type and age of the timber, as well as whether it was planted or naturally grown matters too. Is it mixed pine and hardwood, planted pines, or something else? What percentage of each type does the tract consist of?
Some other physical attributes to consider are overall elevation above sea level, topography, roads in place throughout, ditches, road frontage, power, sewer, water, bodies of water and access to those, soil types, fences, gates, and the overall layout of property features. How much work is required to get the land in good shape for its desired use? If it is a hunting property, are there things like deer stands and food plots already in place? Are there a lot of signs of wildlife being on the property and in the overall area? Is there diversity in fields, trees, bedding areas, etc.?
Some other factors affecting overall value include: scarcity, present and future land use, proximity to other attractions or desired areas, accessibility to economic activities, area amenities, type and proximity of property neighbor dwellings, type and size of surrounding parcels, zoning, future development potential, taxes, safety and security of the area, and many, many more. Just like with most other things, it really all starts first and foremost with location, and then it’s down to the special characteristics of that particular parcel itself, as well as what surrounds it.
Hopefully, now you will understand a little more as to why land professionals are cautious not to just provide a price per acre number when asked. There are a lot of things to consider when discussing land values, and they are always changing. It really is a case-by-case study, and it’s usually more likely that you may be given a fairly broad range of values for a particular area and type of land, than just one per acre number. It’s always a good idea to consult a land professional when determining a property’s value, and even they may need to consult other sources to get the most accurate numbers too, such as foresters, engineering specialists, and other local resources.
As real estate professionals, we always like to have comparative sales data to use when determining the value of property. However, with rural land, we do not always have the convenience of a recent sale of the perfect “comp” (similar property, in the same area) available to use when determining the value of a particular parcel.
Comparative Market Analysis, or CMA – Commonly prepared by a real estate agent to help their client determine a reasonable listing or purchase price for a property.
Brokers Price Opinion, or BPO – Commonly prepared by a real estate broker to determine price (not value), BPOs are traditionally associated with short sales, foreclosures, relocations and/or vacant land.
NOTE: CMAs and BPOs are not Appraisals, so they do not comply with USPAP.