Vacant Land Appraisal Services
There are many factors that are taken into consideration in a Vacant land appraisal valuation process. At Accurate Appraisals USA, we have produced more than 500 vacant land appraisals.
The purposes of these appraisals include:
- Development purposes
- Property tax appeals
- Purchases of vacation property
- Parking lots
These consist of both residential and commercial properties ranging from single city lots to parcels in excess of 300 acres.
Within our experience, we have also performed reports for eminent domain work. Some of our appraisers have worked on reports for the Loop 202 expansion project.
How We Perform a Vacant Land Appraisal
When we perform a vacant land appraisal we will visit the site and physically walk the property for the proper identification of the characteristics.
We will look for things such as elevation, slopes, external influences such as power lines, and evidence of a prior excavation or probability of things being buried.
We will also consider the availability of water and sewer to the site in addition to consideration of the soil type or potential septic system.
As with any appraisal, there are three approaches to value to consider.
- Income Production: The first is the income approach to value which is an analysis and calculations of any income the property may be producing.For example, if it is leased. The purpose of the lease will be analyzed along with the market and compare the actual income to the market income.
- Cost Approach: The next approach to value which is typically not developed in a vacant land appraisal is the cost approach. This approach to value determines the cost to reconstruct the subject of the appraisal.Typically one cannot construct land, therefore, making this approach irrelevant to most vacant land appraisals.
- Sales Comparison: The next approach to value is the most heavily weighted and relied upon (in most cases) which is the sales comparison approach to value.
This is researching the marketplace and finding similar competing properties that have recently sold and applying adjustment amounts driven by the market for any differences such as size or improvements the site may have.
Another important aspect when considering the value of a vacant parcel is the current zoning and future zoning changes that may be applied to the site or the area in general. A potential change in use such as from residential to commercial could have a very large impact on the value of a site.
It is important to select an appraiser who is well-versed in this type of research. A Certified General Appraiser is by far the most appropriate for a vacant land assignment.
Determining the Value of Vacant Land
While there is no single parameter that determines the value of the property. There are some items that weigh heavier than others in certain types of properties in land valuation.
With residential sites, many times the school districts they are located in and the of the availability of public water and sewer is a large determining factor.
The next largest determining factor is the overall size of the site.
Another big consideration for many is if the property is located in a flood zone and if flood insurance will be required in order to construct a new residential property.
Features that may drive value for commercial sites would be the location on a corner lot and the overall street frontage. This is assuming the site is large enough for the improvements.
Another large driving factor is the zoning in determining what type of commercial building/use could be placed on the site.
Another important factor with commercial sites is the availability of transportation such as a railway or accessibility with semi trucks.
Arizona is a mineral rich state with lots of gold and other valuable minerals in the subsurface. This may also have a large driving factor in the value of the property.
Highest and Best Use Analysis
This leads us to what is referred to as the Highest and Best Use Analysis of a property.
The appraiser must perform four tests in order to determine what the highest and best use of a property is. Once this is determined, that is the value that is calculated.
The four tests of the highest and best use are:
- What is legally permissible on the site? Only those uses that are, or may be, legally permitted are potential highest and best uses.
- Is the site physically possible to accommodate what is legally permissible? Any potential use must be physically possible given the size, shape, topography and other characteristics of the site.
- Are the improvements to the site financially feasible? The proposed use of the property must generate adequate revenue to justify the cost of construction plus profit for the developer.
- Maximally Productive test, the use of the property must generate the highest net return to the developer.
What You Need and Timeframe
If you are in the market to move forward with a vacant land valuation be prepared to have the assessor’s parcel identification number and any surveys available for the appraiser.
Also, be prepared to disclose to your appraiser any easements on the property.
As with any appraisal product, the process is an art, not an exact science.
The process is the collection of data that is analyzed and calculated to determine an opinion of market value. It is also important to remember that markets can change very quickly and significantly for seemingly no reason.