Purchased 2.5 acres commercial zoned off frontage road, DOT has also given a cut to access from frontage road. Great interstate visibility and on a busy exit. Purchase price was around $11 sq. ft. after piecing 3 parcels together (each parcel belonged to different heirs). The appraisal came in at purchase price. Going rate for neighboring property is in the $15-$20 range. I am confident that my tract could be sold for that if I were to list.
My question is how do I show the bank the land is worth the higher price when I go to develop it?
Great question. short answer is the bank is really only going to look at an appraisal. Assuming you are trying to line up construction financing? Some things you could to make your case is pull sale comps for the neighboring properties that sold in that range (simply being listed at $15-$20 psf doesnt count until a sale closes); you could also put together a pro-forma analysis for your speculative development using lease comps that justify a higher land price. A commercial broker can provide both data points.
Thanks Taylor. Usually, the initial appraisal comes in right at purchase price since they request the PSA or closing statement. I suppose a LOI from a buyer for increased price would help.