Vacant Land Appraisal

Before undertaking any effort to produce a professional opinion of the value of vacant land, an appraiser must first discover its highest and best use. The highest and best use is the employment of the land that provides the owner with the greatest benefits and that is both legally and physically feasible.

For a parcel of land to be put to any use, the physical characteristics of the parcel obviously must be able to accommodate that use. This means that the topography, size, shape, frontage, and available utilities must be adequate for the envisioned development. If these characteristics are sufficient, it is time to examine the legal status of the parcel.

Zoning is the primary legal constraint on most land. It is worth examining this in detail because constraints such as building setbacks and maximum impenetrable surface area can impose restrictions that limit envisioned development just as much as permitted uses. Building codes impose additional restrictions on use. It is possible that a parcel owner might be able to obtain a special exception to a zoning ordinance, but the likelihood of such an exception should be thoroughly discussed with zoning authorities before proceeding with an analysis based on such a use.

Private restrictions can also limit legally permitted uses. Deed restrictions and any type of easements can prevent uses that might otherwise be very beneficial to the property owner.

An indispensable component of any vacant land appraisal is a thorough analysis of the location of the parcel. Accessibility is an important factor to consider for any property use. Tractor trailers need to access property that is used for industrial purposes, meaning that proximity to highways and the ability of large vehicles to travel from the highways to the site are important.

Office employees need to access office buildings from their homes, meaning that either public transportation or automotive transportation, or both, must be convenient. The category of uses for which location is most important, however, is retail.

Visibility is a prime consideration for retail sites. Potential customers must be able to see a retail site at a point where they have sufficient time to patronize the store. This means that stores located along roads with higher speed limits need visibility from longer distances. A corner of an arterial, radial, or quadrant road and a secondary road is ideal. Less than ideal, but still desirable, are interior parcels with frontage along main roadways. Parcels without major road frontage, even if they are located near major roads, are far less desirable for retail use.

Once the highest and best use has been firmly established, the analysis can proceed to the value of the land. The most common means of discovering this is with a sales comparison approach. This involves gathering information on recent sales of other parcels of land that are as similar as possible to the property being appraised, which is referred to as the subject, and adjusting them to account for differences between the comparable sales and the subject.

Under certain circumstances, the best method of estimating the value of vacant land is to estimate the value of the property once it has been developed to its highest and best use and then deducting the cost of completing this development and discounting the value to account for the time that it will take to complete the development. This is the method that is commonly used for land that is best suited for use as a residential subdivision.