Land is valued for what can be done with it. Unlike buildings, it does not depreciate, and its value depends on rights, location and permitted use.
Characteristics
Immobile, durable, unique in location and subject to public and private restrictions. Value flows from the bundle of rights attached.
Uses of land valuation
Purchases and sales, development feasibility, financing, taxation, condemnation, litigation, estate and gift matters, and financial reporting.
Value definitions
Market value, use value, investment value and liquidation value differ. The assignment defines which one applies.
Common mistake
Assuming the price paid for land equals its market value. Motivated buyers and special uses distort transaction prices.
Key Takeaways
- Immobile, durable, unique in location and subject to public and private restrictions.
- Purchases and sales, development feasibility, financing, taxation, condemnation, litigation, estate and gift matters, and financial reporting.
- Market value, use value, investment value and liquidation value differ.
Check Your Understanding
Before moving on, explain in your own words how the ideas in “Why Land Is Valued Differently” apply to a property or deal you know, and name one number or document you would need to check.
Action Step
Find three recent land sales in your area and note the stated use or intended use for each. Consider how the use may have influenced the price.
This course is educational and does not provide legal, tax, financial, investment or appraisal advice, and does not issue any license, certification or credential. Real estate law, tax rules and licensing requirements vary by state and change over time; consult a licensed attorney, CPA, appraiser or your state regulator for your situation.