Land Appraisals are one of the most important parts of a real estate transaction. One could argue that land appraisals are one of the most important parts of owning real estate. Why then, are they so difficult to understand? This is a quick review of the process and the parties involved.

There’s a LOT of Land

If someone asked you, “How many acres of land are there in the United States,” would you be able to answer it correctly? Would you guess a million? 50 million? Half a billion?

If you answered in your head and guessed any of those, unfortunately, you’re not even close! The United States contains around 2.3 BILLION acres. Alaska, Texas and California are the three largest States in the U.S., accounting for 666,480 acres combined. Excluding Russia and Canada, countries in the world are around the size of Oregon. As a result, our 2.3 billion acres includes a huge diversity of populations and landscapes. This makes it impossible to develop uniform standards for land appraisal.

No Two Pieces of Land are the Same

Landscape can change completely within a few miles. Nothing illustrates this more than Denver, Colorado. From this location, you can look North and see an enormous wall of mountains on your left and flat, rolling hills on your right. In fact, you don’t have to travel miles, landscape can completely change from parcel to parcel. This article can almost end here, all land is not the same and that creates a complicated world for land appraisal. Ending here, however, would be a disservice to you, the reader.

What is a Land Appraisal?

A land appraisal is also known as a property or land valuation. Narrowed down, a land appraisal is the value of land based on the opinion of a licensed appraiser. An appraiser is an individual who has been licensed in a given State to offer opinion on the value of real estate. The licensing process for an appraiser varies from state to state and it can easily be a two year process for an individual to obtain enough experience to earn a license. The Appraisal Foundation is one organization that is nationally recognized and has introduced uniform standards of ethics, but licensing remains State to State.

Land appraisals are given in the form of a report and are based on the value of a particular piece of land if it were to be sold in the open market. Keep in mind when considering a land appraisal, it is not the same as an appraisal on a building. The appraisal process can be broken down into three methods, the most common is the Sales Comparison Approach.

Land Valuation Methods

• Sales Comparison Approach: Comparing a particular parcel of land to other parcels that have recently been sold.
• Cost Analysis Approach: Cost of replacing buildings, minus depreciation, plus land value.
• Income Capitalization Approach: Estimating potential income generated from developed land.

Things that an Appraiser will Consider

• Location
• Easements
• Size
• Shape
• Topography
• Soil fertility
• Aesthetics
• Availability of water (city or well)
• Environmental contamination
• Water sources (ponds, streams, etc.)
• Accessibility
• Road frontage
• Sales comps
• Zoning
• Utilities
• Wetlands
• Fees

How do I Find a Land Appraiser

Land Appraisers can be found in almost every country of the United States. You can find them by looking them up in most local directories. However, the results and service you receive may vary from person to person. One of the most reliable ways to find the right fit for an appraiser is to ask somebody who has experience working with them. Land Professional such as those working with National Land Realty typically keep several Land Appraisers contact information on hand for different purposes. Asking a land professional can be an excellent way to find the right one. National Land Realty also offers a services directory here; just click “services” to see if there are any land appraisal professionals in your area.

Land Appraisal Summary

“At the end of the day, the value of land comes down to what the buyer wants and how much they are willing to spend,” said Tom Culclasure, NLR Land Professional.

It all depends on who you are and what you’re looking to do with a property. According to an article by the CCIM Institute, “The valuation process essentially consists of two parts: determining the highest and best use for the land and applying the appropriate valuation technique.” It really comes down to perspective. The highest and best use for a farmer might not be the same for a developer.