Knowing a property’s value is one of the trickiest parts of real estate. The price that you, or your real estate agent, come up with may be close, but ultimately the true value of any property is the amount that any one person is willing to pay for it. Property values are moving targets and coming up with the right number is almost impossible. The reason it’s so difficult is because it’s determined by who buys the property. One person may be willing to pay $250,000 for that single family residence, while someone else may only be willing to spend $240,000. If that doesn’t seem like a huge difference to you, then answer this question: Would you rather have $10,000 or $0.00?
“The true value of any property is the amount that any one person is willing to pay for it.”
If you own a typical single family residence in a city or suburban setting then the task of figuring out the value comes with a lot of help, especially if you have a real estate agent on board. It’s fairly simple for an agent to find comparable houses that have recently sold in your area. These sales help give a general idea of what people are willing to pay for a house like yours in the area that you live. But remember, it’s not an exact science. It’s all about the buyer. Are they just looking for a roof over their heads? Then they probably aren’t willing to pay top dollar. Have they fallen in love with your house and are desperate to get in your neighborhood? Then you are likely to get an offer for your full asking price. All the more reason to stage your house properly to ensure that potential buyers do fall in love with it.
If your setting is more rural or there aren’t many houses that have recently sold in your neighborhood then coming up with a value becomes more difficult. And, if you’re trying to sell a vacant parcel of land then you have a long, arduous undertaking ahead of you. So many variables can affect your property’s value there’s no way you can address them all. But have no fear, we are here to help. The following is a foundational list to help you determine the factors that affect the value of your vacant land.
“Many people think their property is worth whatever the local government’s appraisal says on their tax bill…this couldn’t be further from the truth.”
Many people seem to think that their property is worth whatever the city, county, or state says it’s worth on their property tax bill. This couldn’t be further from the truth. Generally, the value on your tax bill is called a tax assessment. This is not the value of your property, but rather is an arbitrary number that your local government uses to calculate your property taxes. The assessment is combined with the millage rate, or some other multiplier, and placed into a formula to calculate your taxes. When your taxes go up or down it’s normally due to a change in the assessment or the millage rate.
Often times, a property tax bill will contain another number in addition to the tax assessment. This number might be called a tax appraisal, or appraised value, or land value. This number does not represent the fair market value of your land either. Your local government does not go around and figure out the value of everyone’s property and put that number on their tax bill. This would cost millions of dollars and would be a huge waste of time (imagine that, the government not wasting time and money). Instead, they use a very generalized process to come up with a few values and then they use those values to determine a very broad value for your property. This number could be much higher or much lower than the true, fair market value of your land.
The most obvious factor that affects your property’s value is the lay of the land. This includes topography, water, trees, soil quality, size, and shape. Is your land a steep mountain side or a flat pastureland? You may think a steep mountain side would decrease the value, but what if the buyer is looking for a place to build a log cabin with a view? A mountain cliff may be just what he is looking for. Or what if the buyer is looking for a place to start a dairy goat farm? Then the pastureland would be much more valuable. Does the topography of your lot prevent water from escaping, or does water from the neighboring parcels runoff onto your lot? Is your property in a flood zone? This will likely bring down the value of your property.
“Factors that can affect the value of your property include: location, size, shape, topography, water, trees, soil quality, utilities, and road frontage.”
Does your property have water? A stream or creek is often desirable to buyers, but if the buyer is a land developer then he may not want a creek on the property. Government regulations can make developing around a creek cost-prohibitive. A well can greatly increase the value of a property because it’s an expense the buyer doesn’t have to hassle with, and it assures them that water is already available. On the other hand, a marshy area or bog can decrease your property’s value because it is considered unusable space.
What about trees? Is your land covered in such dense forest and brush that you need a machete just to walk through it? Has it been reforested with hybrid timber?
How is the soil quality? Does it percolate? If the ground percolates then that means it absorbs water well. This is a make or break factor for someone who wants to build a house and put in a septic tank.
How big is your property? Obviously, the more land you have the more it’s worth. However, a single acre may sell for a lot of money if it’s in a prime location. The shape of your lot can affect it’s price as well. Is it all cut up with funky angles? This might make future development difficult, thus bringing down the value.
Utilities and Access
Are public utilities run to or near your land? If electricity and water are already at the street then your property is much more usable, and therefore more valuable. The same thing goes with public sewer. If a sewer line runs near your property then that is a huge benefit, and any buyer looking for land to develop would be willing to pay a premium for sewer access. If your property is nowhere near any public utilities and has no well, then it won’t command as high of a price.
What about road access? Does your property connect to a public road or is it completely surrounded by other people’s property? A landlocked parcel is virtually useless without cooperation from the neighboring property owners. To get a better price for your landlocked property you need to have an easement that allows access through your neighbors lot. Or better yet, talk to your neighbor whose parcel boarders the road and see if he wants to sell together. Having the neighbor’s road front parcel available to purchase alongside of your property can add significant value to your lot.
These are just a few of the factors than can determine what a vacant piece of property is worth. Take inventory of your parcel and see what it has to offer along with finding out what its faults are. But most importantly, know your buyers. They are the ones that ultimately determine what the final value will be.
If all of this sounds overwhelming to you then have no fear. We can easily determine what your house or land is worth and can even show you the software we use to determine our asking price. If you would like to get a free, no obligation cash offer on your house or land then give us a call or fill out the form on our website today.