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How do I Price Raw Land?

Raw land is the one classification of real estate that gets argued about the most, because it is the most subjective.  There’s not a lot that is obvious for comparison. It’s honestly not easy to determine a ballpark value for a piece of land because there are so many factors to consider.  Mineral rights, zoning, usage, grade, detrimental effects such as a flood zone, cost to improve, etc. should all come into play.

The size of the tract will determine price per foot much more so than a house. Smaller tracts/lots are worth more per foot than a 100 acre parcel. It’s easier to find past sales prices then divide it by the square footage of the tract/lot then to multiply your tract/lot square footage to get a value. Use square footage on anything less than 5 acres. Anything more than 5 acres divide/multiply by acres.

Everyone knows real estate is about location. A site next to a toxic dump, for example, probably isn’t going to fetch high dollars, but a vacant lot in an upscale neighborhood is going to be worth much more. Not all vacant lots are created equal and this is where zoning comes in to play. Zoning helps tell us what the site can be used for legally. This means if a vacant lot was zoned for residential housing and it could be split into four buildable lots, that might carry much more weight than a lot that isn’t buildable at all (for whatever reason). On the other hand, if zoning would only permit a property for industrial use, it’s worth considering whether that zoned future use is realistic. In other words, is the market good enough to need and make use of another improved industrial lot? Or is the land worthless to the average person because the zoning makes it unusable for anything else realistic besides industrial use?

Lastly, topography is crucial. Two separate lots might have the same exact size on paper, but if one of them is on a steep incline and has very little buildable space, the lot that is actually useable could be worth much more.

The list price for similar properties can say something about value, though sometimes listings are out-of-sync with the market. Do pay attention to them (as well as pending and withdrawn transactions), but it’s always important to judge each one on its own – and determine whether it says something about the market or not. Find out how much interest similar properties have had from buyers when exposed to the open market and how many days they spent on the market too. It can be telling if listings aren’t selling at a certain level or if they’re fetching a lot of interest at a certain price.

This is important because when there is more inventory in a market, it tends to water down the price due to the increased competition. This is basic economics. When there is more supply than demand, prices will inevitably come down.

For a free market valuation of your property, please contact Vince Davis or Nicole Drew, with the Helping Hands Real Estate Team™ at 480 385 9107 or at vince@agentswithoptions.com

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