How to Figure Out
The Value of Land
Question: I recently sold 30 of my 60 acres to a person that built a million-dollar home on it. The house and property combined are worth approximately a million and a half dollars. People across the street from my property sold 12 lots, 2 1/2 acre each, for $40,000 apiece before this million dollar home was built. I wish to split up the rest of my 30 acres into 2 1/2 acre lots and sell them, but I was wondering if I could reasonably ask more than $40,000 a lot since the property is located next to this million dollar home, or do I have to stay around $40,000? I figured sharing your property line with a million dollar home would suddenly increase the properties worth . . . or not.
Answer: As you correctly imply, land values are determined by prices attained by comparable sales of nearby, similar properties. A person building a million-dollar home next door will certainly improve property values in your area. The only question is, by how much?
Q&A: Does moving to a smaller home make financial sense?
You need to do a CMA (Comparative Market Analysis) on other lot sales and on other homes nearby. If close-by homes are all in the million dollar range, you can probably get twice the earlier asking price, or more. On the other hand, if there's one million dollar house on a 30 acre lot, with many $200,000 houses nearby on 2 1/2 acre lots, the $40,000 lot price still might not be far off.
For about $300 you can get a qualified appraiser to come out and give you a good estimate of the value of your lots. Check with a local lender (which uses appraisers regularly) for a recommendation. Some of the best appraisers are MAI (Member Appraisal Institute) designated.
Mr. Irwin has more than 25 years' experience as a Los Angeles-area real-estate broker. He is the author of more than two dozen books about real estate and is recognized as one of the most knowledgeable writers in the real-estate field. Mr. Irwin's most recent book is "Tips & Traps When Buying a Condo, Co-op or Townhouse," (McGraw-Hill, 1999).
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Drake, DeLand, Fla.
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