How is Land Priced: Factors that Influence Land Value
Whether you’re buying your first property or preparing to sell the family farm, a basic understanding of the factors that determine how land is priced and valued is crucial. Especially for sellers, pricing is one of the most important aspects of a successful land sale, as TX Land Broker Wayne Dunson explained during his recent appearance on the National Land Podcast.
Here are a few factors that dictate the price of a property and the things you should know about how land is valued!
Demand
Like any other commodity, land values are largely influenced by supply and demand. When the demand for land in a given area or of a specific type outpaces its availability, prices naturally increase. Factors driving demand can include population growth or urbanization, but demand can also be influenced by massive events such as the COVID-19 pandemic, which pushed demand for available land to all-time highs throughout 2020 and the following years.
As we saw last year, economic conditions also significantly drive demand for land. Throughout 2024 buyer availability increased as interest rates slowly came down. Oftentimes land is worth what someone is willing to pay, which is why keeping an eye on comparable sales in your area is an important part of understanding exactly what your land is worth in the current market.
Location
While you’ve probably heard it a million times before, the old adage of “location, location, location” holds when it comes to how land is priced. Land near major metro areas, bustling business hubs, prestigious school districts, or popular recreational spots is more likely to demand a higher price than an isolated acreage out in the country.
That’s not to say that remote land can’t hold value, especially if it features stunning views, privacy, and easy access to amenities or other growing economic opportunities. The potential for growth of an area can be a big factor in driving up the value of land in those places.
Access
Ease of access can make or break a property’s value. The most incredible hunting property isn’t worth much if there’s no way for hunters to get to their stands legally. Properties near major highways, well-maintained roads, or transportation hubs like airports are generally more valuable than their less accessible counterparts.
For rural properties, clear entry points, legal easements, and the quality of existing roads can have a large influence on the overall price of the property. Similarly, established internal road systems can drive up the price since new landowners won’t need to take the time to do it themselves. Existing conservation easements that restrict the building or development of a property could also impact value, which is why landowners need to consider the long-term implications of these programs before entering into any kind of binding agreement. Difficult-to-access properties may see reduced buyer interest and have to accept a lower price in order to close a sale.
Resources
The presence of oil, gas, timber, or other valuable resources can greatly enhance land value. Conveying mineral rights to a new owner can drive up the sale price since the new owner can extract and profit from resource deposits on the property. Similarly, existing stands of hardwood timber like oak often garner a higher price due to their high demand in the timber market.
The Importance of Proper Pricing
Correctly pricing your property is one of the most important aspects of selling your land, and failing to do so could leave your property sitting on the market for much longer than it should. Speaking to the significance of correctly pricing your land, Dunson stated the following:
“The closer you can get to the market average, the faster you’ll get better offers in. That’s just the way it’s going to work. If it’s priced too high, people buying in that higher price range are going to expect more for their money, so if your property is priced at $1M but it’s really worth $750K, they probably won’t bite at it.
You also risk pricing out the people looking for a property like yours if you’ve got it listed too high. Other brokers won’t show it to their buyers if it’s too far out of their price range, and a property sitting on the market too long can put a stigma on it in the minds of buyers. They’ll stop thinking about it since they’ve seen it up for sale for so long.”
By taking these factors into consideration, you can approach your land sale with a realistic idea of what your property is worth and be more prepared to work with your Land Professional to agree upon a fair price that reflects the true value of your land.
If you’ve got questions about how land is priced or want to find out what your land is worth, get in touch with your local Land Professional today!