How do you determine the fair market value of land?
The fair market value of land and the marketplace comparison technique should represent the current genuine sale prices that landholders or sellers are receiving from prospective purchasers. The key to assessing a land's fair market value is to have accurate, thorough, and up-to-date information on a sufficient group of common properties that have recently been sold, typically within the past two to six months. Read on to find out more ways to determine a fair market value of land below.
What is the fair market value of land?
The fair market value of land is the amount that a competent and motivated buyer would pay for it in normal, pressure-free circumstances. It is dependent on your land's attributes and appeals. The fair market value is the amount you'll need for your financial planning based on the value provided by your evaluation.
Three ways to determine the fair market value of land
1. Gather information about other properties in the area
Collect data regarding five to ten similar properties in the neighbourhood. When larger sums of money are concerned, it is the norm to have more than one person to make land value assessments. Calculate the approximate fair market value or actual selling market value for every square metre.
Decide whether the land being sold is more expensive, less expensive or in the same price range as the land of concern. Take note of the properties' differences and similarities; properties of equal size may have small or large differences in values.
2. Obtain sales information for surrounding properties
Get current sales data for land that is similar to the property in question. The latest sales records at the land registry, and assessments on identical properties, are the greatest sources for fair market value and comparable properties.
Similar land sales in the nearby, neighbouring and bordering property areas provide additional resources. Some agents exclusively utilise recent sales in a given area, neighbourhood or land district to calculate the fair market value.
3. Look at comparable sales
Choose the market technique to estimate land value by examining similar transactions over a two- to six-month period. A sales duration of twelve to twenty-four months may be considered in some circumstances where sales have been limited or irregular.
Market fluctuations may be substantial in a matter of months, so it's ideal to have the latest sales data on hand. Nearly all property purchases should include the employment of an estate agent, a solicitor or both.
Three factors that impact the fair market value of land
1. Physical attributes
These factors include the location's quality, geography, climate, local amenities. A higher land price is related to more and better facilities.
Furthermore, geography has a direct impact on building costs and, as a result, overall development costs. The costs of developing infrastructure on uneven soil will be substantially greater than on a flat plane. This is why land prices can be lower in mountainous places and building costs are substantially greater.
2. Accessibility
The greater the convenience with which economic activity may be accessed, the higher the value of the land. Most urban areas such as Manchester and London, for instance, have the highest land prices near the city's centre or central business area. This is due to both the closeness to economic activity and the office. This single most significant element that impacts land value is what led to the creation of numerous land pricing models in urban economics.
3. Neighbourhood amenities
The availability of services such as retail districts, healthcare centres, schools, playgrounds and other fundamental human necessities also affects the cost of the property. This helps individuals save time each day, and the savings made adds up to the price of land.
A buyer may choose to live in a residential neighbourhood or in a commercial region, depending on his or her needs. The expense of everyday travel and transportation is directly affected by such a location.
Contact NFC Homes
NFC Homes is a London-based residential development that works throughout the United Kingdom. We're pleased to say that we have successfully produced over 1,500 new houses and commercial spaces over the last 15 years.
We are able to provide the best available service to our clients by utilising our in-house planning, administrative, engineering and house-building experience. We have a proven track record of planning and completing property developments on schedule and to a high standard.
For more information on determining a fair market value of land, make sure to get in touch with our expert and friendly team here at NFC Homes today.