Establishing True Property Value Is and Art and a Science
Whether for estate purposes or strategic planning, we can evaluate your land to determine its value under various scenarios. These scenarios depend upon timeline, projected value at the time of a deal, and your goals, among other vectors.
Let’s look at a few examples for a field:
A 10-acre farm field that could support 20 houses by zoning may be worth its agriculture value—say, $2,500 per acre if settlement is expected in 45 days.
But, it’s worth a bit more than its agriculture value— say, $6,500 per acre—if the buyer is able to complete a feasibility period, including creation of a concept plan showing the actual density that could be achieved, taking into consideration actual site conditions and required constraints and limitations. Settlement could take place within 120 days.
Or, it may be worth $70,000/acre if the seller will allow the developer to process the plans through the local county planning and zoning subdivision process and settle based on the number of lots actually achieved at record plat. Settlement in full on the entire property may be two years based on the property yielding 75% of its proposed density. (15 ) lots and the expected base house price is $300,000, with the seller paying half of closing costs and all of the agriculture recapture tax.
With more strategic planning and a longer timeline, that field could be worth $250,000 per acre if the seller is agreeable to settlement at record plat (two years) and the (developer/builder) settles after each individual home goes to settlement (15 settlements for the landowner over the course of four years (two years to process plans and two years to develop the property and build the houses) base price of the houses $550,000. Buyer pays all of the agriculture recapture tax and splits half of the costs of closing.
In each of the above scenarios, time and uncertainty has had major impact on the value of the property. It is important to consider all of the issues and opportunities that determine a property’s value.
Market Analysis
A market analysis is useful in determining what the highest and best use of a property is under various development scenarios. It takes into account adjacent properties as well as projects in the pipeline and parcels of land currently under construction. The goal of market analysis is to determine the likelihood that a project will succeed given the information known about the property, market, and market conditions. A potential buyer is attempting to answer the following questions. “If I build this, will they come?” The possible answers are—go, no go, go with modifications.
A buyer is using the discipline of market analysis to answer questions and to determine the following:
- How many units of a given product type should be built on the subject property?
- How many units of that product type are already in the construction process?
- How many units are being absorbed into the marketplace on a monthly or annual basis?
- What is the price point that is most attractive to purchasers?
- What are the options that are of interest to the consumer?
- Who is my buyer?
- Why would they want to purchase here?
- Where do they work? Recreate? Educate? Worship?
- What is the cost to build?
- What is the projected absorption of the product type(s) proposed for the subject property?
We do not use templates for our analyses because each property is unique. We will complete a market analysis that fully answers all the questions that are needed for each party to make an informed, confident decision. Complexity is not an issue for us. Call us today {link} if you would like to know how your land can best serve you.