What is a Land Appraisal and How Is Land Appraised?
When there is land for sale – whether raw acreage, farmland, commercial property, or residential – a land appraisal is the key component of the process. Any loan for a property is based on the appraisal value. As a land buyer, owner, or seller, understanding the true market value of the real estate in question is important. This will help you make the most of your land buying decision. But first, it’s important to understand what is a land appraisal, how it is appraised, the real estate appraisal process, and what to expect. We dive into these areas, below.
What is a Land Appraisal?
Land appraisal is a process of assessing the land value and then developing an opinion of value. A licensed appraiser produces a report determining the price a land owner can make from selling the land. Land appraisals are also useful when buying land through a loan from a lender. Even if your lender doesn’t require a real estate appraisal, we recommend having one. A land appraisal process involves many factors, such as identifying the land quality, size, and location, sales comps, best use of the land, and potential future development. Also referred to as a land valuation, property valuation, or real estate appraisal, the ultimate goal of a land apprasal is to determine the market value.
How is Land Appraised?
Buying land can turn into a lucrative investment, just as selling land can bring the seller a high return on their investment. Before you buy or sell land, you must have the land surveyed and land appraised to determine land value estimation. Surveying land will determine its size, boundaries, and exact property lines; appraising land will determine its current market value. Licensed land valuations vastly differ from building valuations.
So, how is land appraised? When determining land value, there are many pertinent factors that a certified land appraiser must consider. This information lets land buyers know if the land price is reasonable and informs them of the pros and cons of the land they’re looking to buy. Likewise, it can help land sellers come up with an appropriate listing price for their Ohio land for sale, as well as a list of selling points.
What is a Vacant Land Appraisal (or Raw Land Appraisal)?
A vacant land appraisal (also referred to as raw land appraisal) is land valuation of property without a structure. A vacant land appraisal is more difficult to determine than land with a structure. With vacant land (or raw land), it all depends on the plans for that property. Will the vacant land for sale be used for commercial activity? Does the land buyer plan to build a house or commercial property? Are there plans to turn the raw land for sale into farmland or hunting land? Generally speaking, commercial-use land is typically worth more than land with a house built on it.
Vacant land appraisers can determine the market value of the land you want to sell or buy. Land appraisals are generally a requirement to finance raw land as lenders want to confirm that the price is fair. Vacant land appraisal costs can vary, based on the property’s location and specifications; the vacant land appraisers’ experience can also affect the cost. You should obtain a few land appraisal estimates before deciding.
Land Valuation Methods That Certified Land Appraisers Use
What appraisal method is used for land most often, and what factors affect land value?
3 Common land valuation methods:
- Sales comparison approach. The most utilized and direct land valuation method analyzes comparable land sales. However, adjustments are account for location, size, condition, and feature distinctions. (In the next section, we outline what affects land value.)
- Cost analysis approach. This land appraisal method deems any structures on the land cannot be worth more than their installation cost. The remaining value of the improved plot factors into the land. However, depreciation makes it difficult to calculate the structure’s value; therefore, this method is ideal when newly constructed so the price can be assessed as a measure of value.
- Income capitalization approach (income potential). The income cap approach method estimates the potential income generated from the developed land. The structure’s value is assessed, and the income attributed to the structure is then determined. Lastly, the remaining income then determines the land value. That said, depreciation or divergence from the best use can skew the income potential of the unimproved land.
2 Advanced land valuation methods:
There have been many advancements in land valuation practices, involving computers and mathematical formulas. Some of these newer land appraisal approaches help connect sale prices and property characteristics. Two types of land appraisals utilizing these methods are as follows:
- Computer-Assisted Mass Appraisal (CAMA). This land valuation method allows certified land appraisers to estimate the market value of comparable properties, regardless of whether they recently sold.
- Computerized Geographic Information Systems (GIS). This land valuation method enables certified land appraisers to generate property records based on location to compare with sales data.
What Factors Affect the Value of Land?
So, what factors influence land value? First, we’ll detail 17 distinctive property factors that affect land value:
- Size and shape of the land plot
- Condition of the land/topography
- Timber values
- Wildlife or ecological concerns
- Conservation value
- Environmental factors
- Property characteristics and amenities
- Mineral rights
- Improvements made to the property
- Layout of the land parcel
- Land use restrictions and zoning requirements
- Land easements and encumbrances
- Utility hookup and sewer options on the property
- Soil quality and characteristics
- Requirements to build on the land (e.g., costs of clearing the land)
Next, we’ll detail 4 overall local market trend factors that affect land value:
- Supply and demand
- Interest rates
- Prices of commodities
- Trade negotiations
What to Expect from Land Appraisals
Land appraisals determine whether the land listing price is accurate when you compare it to the actual value of the Ohio land for sale. A land appraiser can assist you in determining the actual value; they will create a land appraisal report that includes many details. Whether you’re seeking a farm appraisal, vacant land appraisal, or an appraisal on land with a structure, the report will determine market value.
Keep in mind that an appraiser’s report is more detailed than a comparative market analysis.
Typically, a land appraisal report produced by an Ohio land appraiser will include:
- A comparison of the “subject property” with similar properties in the area – at least three.
- An estimate of the time it may take to sell the property.
- A description of the area in which the property is located.
- An explanation of any negative aspects which may impact the market value of the “subject property.”
Understanding Land Appraisal Values
Understanding what a land valuation entails is only the beginning. To make an educated decision about any land for sale in Ohio, investors and buyers should consider how land appraisal values are determined and what they ultimately mean for the selling process.
- A land valuation report showing a value lower than one expects may cause a transaction delay or cancelation.
- When refinancing a mortgage (for example, on a home) a low appraisal can prevent this.
- For a land seller, a low appraisal means you may need to lower the price of your property to sell the land.
- For a buyer of land for sale, keep in mind that the bank will never lend more money for a property than its actual worth; this makes the land valuation an important first step if you have specific land in mind. If you plan to buy raw acreage for sale, other elements can factor into the valuation, as opposed to commercial land.
Commercial Land Appraisal Near Columbus, OH
Are you wondering, “How do I find a land appraisal near me?” Whether you’re looking for a land appraisal near Ohio or specifically near Columbus, OH, hiring a land appraisal services company should be a simple task. However, not all appraisers are as experienced in land valuation as others; just as not all appraisers specialize in residential or commercial land valuation, or raw land valuation. You must research the appraisal management company you are looking to hire. Ask questions about their background, experience, commercial land valuation methods. Find out how long does a land appraisal take for them. Below are some questions you can ask the licensed land appraiser.
- What is your background and experience in land appraisal services?
- What experience do you have appraising land in the local area?
- How long does it take to get a land appraised?
- What is the cost of a land appraisal? (Or what is the average cost of a land appraisal?)
- What happens during a land appraisal?
- Can you send me a sample land appraisal report?
- How is land value appraised or calculated?
- What is your land appraisal process (also referred to as a land assessment process)?
- What land appraisal methods do you use?
Pro Tips: If you’re looking to buy land for sale in Ohio, we have a wealth of resources in our blog for land buyers and sellers.
Hire a Certified Land Appraiser
Make sure you work with a certified land appraiser. Confirm that the prospective appraiser has a license in your state. You can ask for their real estate appraiser license number. Then call your state’s real estate department or a comparable office to confirm that their license is active.
You can contact the following two offices to verify a certified land appraiser in Ohio.
- Ohio.gov Real Estate & Professional Licensing (REPL): REPL licenses Ohio real estate appraisers, brokers, salespeople, home inspectors, and more.
- Ohio REALTORS’ Ohio Division of Real Estate and Professional Licensing: This division licenses Ohio real estate appraisers, brokers, salespeople, and foreign real estate dealers and salespeople.
Get a Commercial Land Valuation on Your Ohio Land for Sale or Land to Buy
For any commercial real estate transaction, a certified land appraiser is an objective third-party with no financial stake in the transaction. These commercial real estate valuation professionals are licensed by the state and knowledgeable about the specifics of the real estate market regarding land sales.
When it comes to commercial real estate and land appraisals, the leader in the community is The Robert Weiler Company. Since 1938, our certified commercial real estate appraisers have been providing objective and unbiased valuation on commercial property and Ohio land for sale. Want to know more about how land is appraised? Ready to schedule a land appraisal on your commercial property or land you’re looking to buy? Call one of our land valuation experts today at 614-221-4286.