Understanding how to appraise and value land is crucial if you own a plot of land you want to sell. Different people will consider the plot of land from different perspectives, valuing the land differently.

As a landowner, you want to achieve the highest price possible without feeling exploited, while the buyer doesn’t want to feel overcharged. The process can feel daunting, but it shouldn’t be troublesome at all when done correctly.
Here are some vital factors to consider when determining the worth of your plot of land.

Calculating the Value of Your Plot

The land is only one factor in calculating how much your plot is worth. A residual valuation method is an essential tool and more precise way of quickly identifying the value of land with development potential.

Plot Value = End Value – Development Costs – Desired Equity (Developers Margin)

The idea is to establish the worth of the proposed home after it’s finished, then you identify and progressively deduct the costs incurred in house design and building. You’ll then be left with a surplus that provides the desired equity or development profit.

The sum involved in buying the plot of land should also include all expenses you’ve incurred with the purchase. The calculation is straightforward and is essentially the valuation of your plot of land. However, it’s sensitive to different variables, and this is where difficulties in valuation arise.

Considerations when calculating your plot’s value include:

The End Value

You need to start by understanding the end value of the intended buildings. The trick is to work out what the land will support and what can be approved by the local planning authority.

Determining the end value should be straightforward once you’ve established a clear vision of what’s possible. Research the properties in your local area or ask estate agents to value your proposals since they know local property sales.

Costs of Development

The development costs cover all expenses of building on your plot of land, from professional fees to finishing and everything in between. Value engineering and cost analysis can help you focus on eliminating unwanted costs to improve quality and function.

Savings can help you reduce costs and increase profit and the value of your land. Generally, development costs will be influenced by:

The Site

Depending on the condition of your plot of land, costs may be incurred for site surveys, removal of any contaminants, or levelling of slopes. Physical barriers or trees may also restrict usage and make it difficult to access the site.

Design

Professional services may be required to ensure regulations and planning requirements are followed.

Specification Level

The level of specification required on your plot of land to improve functionality and the finish may be good or bad for the plot valuation. Always consider whether certain features add value or compromise the plot valuation and how individualism impacts costs.

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Build Costs

The expected build cost is essential in plot valuation calculations because it’s the most significant slice of the cake and is susceptible to different views. Costs can add up with inexperienced project management, and you have to factor in contingencies like insurance to protect the investment.

Desired Equity

Also called the developer’s margin, it’s the profit you expect to gain from your plot development efforts. The equity level is usually subjective. Some may consider it essential, while others may be less interested as they believe the opportunity to build on the land a sufficient reward.

Those not interested in profits may be willing to pay more and not deduct any allowances, driving up the value of your plot of land.

Factors That Can Increase or Decrease Your Land Value

Planning Permission

Whether your land has planning permission is a crucial factor in deciding its value. On average, a plot of land for sale with planning permission is worth around eight to ten times the value of land for sale without approved planning.

While it’s possible to sell your plot of land without planning permission, it makes it less valuable. Buyers looking to develop properties on your land may be discouraged without planning permissions in place because there’s no guarantee they’ll be able to get in the future.

Location

If your plot of land is located in an area that’s particularly desirable for property development, it can fetch attractive prices in the market. In contrast, the value of your plot of land may decrease if it’s situated in a remote area that’s not very attractive for developers, and you may have to accept a lower price.

Topography

The final land value will be significantly influenced by the conditions of your plot of land. It will require a thorough evaluation that answers important environmental questions while noting artificial and natural land features. It’s crucial for buyers looking to develop agricultural, green belt or garden land.

Some government agencies may require topographic surveys as part of regulatory requirements. The topography valuation can provide an idea of the land’s long-term sustainability and any possible pitfalls. Important factors include whether the area is prone to flooding, the presence of wildlife, and soil conditions.

Access

The accessibility of your plot of land is a significant factor to consider when appraising its value. Whether your property has good access to necessary systems like sewer lines, power or water will affect its marketability to potential buyers.

Transport and Amenities

Your land’s value can also be determined by whether good links to transport options like train routes or a local bus are available. Buyers may consider proximity to transport connections, and the better the connections, the higher the value of your plot of land.

Additionally, buyers will consider there are other essential amenities and services in your area. The value may be influenced by the availability of schools, hospitals, shopping malls and other services.

Final Thoughts

One way of increasing the value of your plot of land is by ensuring you acquire planning permissions. It helps clear a significant hurdle among buyers for whatever project they want to develop, increasing the odds for a great price.

If you’d like to find out more about how Ashtons can help you contact one of our branches for further information.