Your question seems relatively simple, however as one might conclude from the various answers provided so far â€“ the answer that works best for you is potentially much more complex than suggesting you look at your local tax assessorâ€™s property taxroll (wherein the land and improvements (building structure) have been previously estimated). If that would work for you â€“ disregard the rest of this pieceâ€¦ for my answer becomes â€œanalysis paralysisâ€.
If youâ€™re still reading, assuming you wish to demonstrate a diminished value because you are â€œappealing a property tax assessmentâ€. Your task will be to create reasoning that is supportable and comprehensible to back either an enhanced or diminished opinion of land value.
In solving this dilemma, different approaches can be used (depending on your desire). They are: replacement and substitution. I suggest you begin by finding â€˜active listingsâ€™ and recent â€˜soldsâ€™ of similar unimproved property in your immediate area.
Raw land (unimproved / without any structure) has comparable desirability beginning with location. Thereafter, characteristics such as slope, view and neighboring uses will dramatically effect the value. Assemble a matrix wherein the address is listed and to the right, create columns in which a number value is given for improvement costs. Features here are those that would be need to be completed for the property to attain its highest and best use. Factors such as the ease and installation of utilities â€“ for example, gas, electricity, water, telephone and sewer, or streets, sidewalks, drainage and grading being completed. These hard costs need to be DEDUCTED from the final value (when one completes all planned improvements). Donâ€™t forget the soft costs such as financing, design, engineering, impact and permit fees. What is dollar amount remaining once the costs are backed out? That number should be the raw land value.
The principle of substitution maintains that the value of a property tends to be set by the price a person would have to pay to acquire an equally desirable substitute property. So in the end, reconciling to a final estimate of value, could you buy an existing property (with all of the afore mentioned improvements) for less than the time and effort (and cost) to assemble a similar property?
In this present market, many improved properties are absolute bargains that couldnâ€™t be replaced for the duplication costs of creating a substitute.
Many times the final answer will depend on the emotional value of the land and creating a truly unique property â€“ one that cannot be easily duplicated. I wish you the best of luck in your calculations.... more
hi Erin. Congratulations on your offer. I have written a four part blog about whether it is the right time to buy. You'll find some useful information and points at the link I reference below. Good luck!... more