Valuating land carries a direct relationship to a highest and best use analysis. The comparison between highest as well as use and land or land value will demonstrate whether an existing use is the highest and greatest use of the land.
The valuation of land plays a tremendous part inside total valuation of property value or property. Appraisers will usually create a bid of land value outside of other features of property for example building improvements. The land value and building value will alter to be able to rates with regards to the improvements and their corresponding depreciation factors. For many estimations of real estate property valuation, an outside figure for land is the greatest strategy to evaluate the perceived value.
Although total property estimation could possibly be brought forth from direct comparison or income approaches without separating land and building values, it could be had to value the land separately to detach the land figure in the overall real-estate worth. In the cost approach, it is really an absolute necessity to estimate land and improvements separately.
Creating an impression of land value can be presented as a different hurdle in the valuation process. You may use several strategies to attain a symbol of land value including the following:
- Direct Comparison
- Land Residual
- Ground Rent Capitalization
- Subdivision Development
Usually one of the most accurate and effective in the strategies to derive a land value is the direct comparison approach. However, when there's a small selection of of sales available or in the event the estimate produced needs addition support, other techniques might be employed to back the comparison approach like the ones previously mentioned. With the allocation technique, either sale transactions of improved properties could possibly be analyzed or perhaps the total prices paid can be allocated between land as well as the improvements. Comparable sites under development can also be analyzed and the cost from the finished properties should be allocated between land and improvements or buildings. Under the extraction technique, land value depends on subtracting the estimated value from the depreciated improvements through the known sale price from the property.
The other ways of land valuation that were mentioned all use Income Capitalization. Using these techniques are be subject to more limitations and are used less often within the estimation of land. The subdivision development method is a special method attractive specific land use cases. The land residual strategy is used generally the highest and greatest use analysis to try the feasibility of uses that to value land as part with the traditional methods to value. The ground rent capitalization might be used when land rents and land capitalization rates are available inside focused market or area. A comparison of these information will likely then be cross-referenced to the subject land in need of a quote.