How Do I Appraise Raw Land?

Question

Im interested in knowing how to appraise raw land. I ran into a few empty lots that i think would be great for apartment buildings or houses. Any feedback greatly appreciated. Thank's

Account Closed · Answer

Highest and best use. How could the land be put to productive use? What would it cost to get from the present state to the future state? What are the risks and how much margin do you need to reward you for taking the risks? By risks I am thinking of both improvements that go wrong and planning issues where you do not get permission to do what you expect.

The land is like a tool. How much can you make with it if you get to use it the way you expect? How little is it worth if you are blocked or there are problems developing?

Developing land can be a high risk area. It also requires specialist knowledge. Expect to pay for services or take on partners who are specialists with the market, the regulations, etc.

John Corey

Jon Holdman · Answer

Sacramento,
I for one would love to hear about your experience with development.  There are a couple of threads in the Developing forum that have never had any real responses.  If you're willing to share, I'm sure a number of folks would like to hear about your experiences.
Jon

N/A N/A · Answer

This is my first post, but as I have developed several parcels of raw land in the past year, here is my .02 cents.  I have used an appraiser who has working knowledge of raw land development, but specifies in residential appraisal.  My reasoning behind this is, I am developing less than 1-2 acres of land.  I am able to give him an idea of how many lots I will get out of the land.  He then is able to find comps from a cost apporach and apply appropriate discounts for development.

I suggest you build a good relationship with an appraiser that you trust.  Let him know your long term intentions, and work out the appraisal with him.  Worst case scenario: you are unhappy with the numbers, and you have to ask for a second opinion.

Candice Gordon · Answer

We it depends on what you are planning if you are doing to develop the property you must first know the zoning, then you need to find a commercial appraiser, you give them a run down on your plan then determine the potential of the property as far as income and actual value once the project is complete. Beware that these kind of appraisers are no the same as residential appraisers, research and find a good one who takes their time to do the research. Also they are sometimes pricey, I just spent 3k for an appraisal but they are needed and worth the money