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Land Value Questions

michiganlakelotRecently I was approached with an opportunity to purchase a parcel of vacant lakefront property. It was a parcel that could be divided into three different lakefront lots. After giving thought to what the expenses of road construction, utility work and other costs associated with a split, I thought about the next obvious question. What could the lots be sold for after all the improvements?

I posed this question to Mr. Jim Thrower who recently wrote a guest article entitled Water Appraisal. In a case of a lakefront property, A lot becomes available for purchase and there are no known comparables for a vacant land sale. The lakefront is almost 100% developed. There are several homes that have been sold. How do you determine that vacant lotís value?

I thought his answer would be of interest to you.

ďGood question. If I cannot find any recent sales within a 10 mile radius of the subject, I will go back in time, 2-3 years tops. I will make time adjustments. If I canít find it those, I will look for recent house sales with tear-downs.  I.E. Somebody bought an older cottage and rebuilt (itís a land sale!!!). This happens a lot on Lake Michigan. If I canít find that, then I will take recent house sale and do a cost approach on the house and back into a land value.Ē

Good answer. Sometimes it is a difficult task to come up with a market value for unusual properties and I think this information helps. 

Written by Dave.