Real Estate Express

 A comparison between the highest and best use and the value of the land or lot will show whether the existing use is the highest and best use of the land.

Land appraisals play a huge role in the overall appreciation of the value of a property or real estate. Appraisers often create an estimate of land value separately from other property features, such as building improvements. The value of the land and the value of the building will change at different rates depending on the improvements and their corresponding depreciation factors. For many real estate appraisals, a stand-alone lot figure is the best way to evaluate perceived value.

Although a total property estimate can be derived from direct comparison or income approaches without separating land and building values, it may be necessary to value the land separately to separate the land value from the total property value. In the cost approach, it is absolutely necessary to value land and improvements separately.

Creating a land value appraisal can be presented as a separate hurdle in the valuation process. There are several techniques you can use to achieve an expression of land value, including the following:

- Direct comparison

- Extraction

- Residual land

- Capitalization of rent

- Development of division

- Allocation

Usually the most accurate and efficient of the techniques for deriving land value is the direct comparison approach. However, if a limited number of sales are available or if the estimate produced requires additional support, other techniques such as those mentioned above can be used to support the comparative approach. Using the allocation technique, either sales transactions of improved properties can be analyzed or the total prices paid would be divided between the land and the improvements. Comparable sites under construction can also be analyzed and costs of completed properties should be allocated between land and improvements or buildings. Under the mining technique, the value of the land is determined by subtracting the estimated value of the depreciated improvement from the known sale price of the property.

All the other land valuation methods that have been mentioned use income capitalization. The use of these techniques is subject to more limitations and is used less frequently in soil estimation. The subdivision development technique is a special method useful in specific cases of land use. The residual land technique is most often used as a highest and best use analysis to test the feasibility of different land uses as part of traditional valuation approaches. Land rent capitalization can be used when land rents and land capitalization rates are available in a targeted market or area. A comparison of this information will then be cross-referenced to the subject land it needs

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