AMA - What Can Influence A Land Appraisal

The Real Estate Espresso Podcast

AMA – What Can Influence A Land Appraisal

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AMA – What Can Influence A Land Appraisal

In this AMA episode, “Ask Me Anything,” we will ponder upon a real estate appraisal question from one of our listeners.

A Listener’s Dilemma

The query of the day comes from Raphael, a project ready to step into the construction phase. Raphael is burdened with a Parkland Dedication Fee imposed by the City, equivalent to 7 percent of the land value. This land value is likely different from the amount he paid several years ago. Speculating over this, Raphael asks if the appraiser will take the cost incurred to prep the land into consideration.

Land Value and Variables

Understanding the appraisal rules set by the City is crucial, as no direct landowner influence over the appraiser should be exercised. The value to be evaluated could depend on various factors, such as the grade of the property, its state (wooded or cleared), availability of basic amenities such as water, sewer, and electricity, and whether or not it is designated for development.

Appraisal Factors	User Checklist
Land’s grade	Check if it is suitable for construction
State of Land	Ensure it’s in a development-ready state
Basic Amenities	Availability of water, sewer, electricity
Designated for development	Observe if the land is zoned for development
Environmentally clean	Ensure there’s no environmental contamination

Along with this, another aspect that should be evaluated in the land appraisal is if the land is environmentally clean; a polluted property’s worth is definitely lower. Raphael should ideally discuss these factors with the appraiser to establish an understanding of the process. However, these discussions usually take place between the buyer and seller before the land’s sale. If these factors come to the forefront after possession, they should reflect in the land’s valuation.

Archetypal Appraisal

Appraisals are susceptible to great debate, and appraisers are acclustomed to defending their values. They are usually backed by comparable properties, but land appraisals suffer due to the scarcity of these transactions. This situation is further aggravated by rapid market changes, making even few-year-old transactions obsolete for valuation. Appraisers, hence, often struggle with creating accurate and defensible valuations with insufficient and outdated data.

Raphael has raised a common concern that occurs during land appraisal. By giving careful thought to every variable that could influence the valuation, and providing clear information for each to the appraiser, you create a strong foundation for a defensible appraisal. Good luck with your project, Raphael, and to all real estate investors out there, go make some great things happen.

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