The traditional way to value land is through the use of comparable sales. But what do you do when there are no comparable sales, an inability to secure financing and even fewer buyers? Many banks are requiring appraisals and requesting “Broker Price Opinions”. A BPO is what the broker believes is a reasonable price the property will sell for based on several factors related to the current market.
The true market value is what a ready, willing and able buyer will pay that a seller not under duress is willing to accept. As a land broker, we try to evaluate the property based on the assets on the property, recent comparable sales of similar properties and other properties of like kind that are for sale on the market.
This valuation process has nothing to do with what you paid for your property or what value you want for the property. I have many landowners telling me they paid X amount of dollars for property and they want that amount plus a brokers fee as the sales price. I understand this and appreciate what they want, but buyers are going to research the property and compare it to other properties to find the best deal.
The first part of our valuation consists of breaking the property down into compartments of varying assets from timber type and size, land type, improvements (houses, barns, lakes, rivers, …) and anything we can find that adds value to the land including character. This may include a timber inventory and many other assessments of value. The second part is in a previous blog on our site regarding knowledge of the product and that market (Two Most Important Factors in Selling Land). It is important to know what other similar properties are on the market in that region. Other available properties do have an affect on the value of your land. Part of our job is to have knowledge of these properties.
Many factors affect the value of land. Green Hill land & Timber is heavily involved in the land and timber market in this region. We understand the process in evaluating land and timber and can help you understand what and why your land is worth what it is. These values do change over time based on economic factors and the value of the improvements. Let us know if we can assist you with your land and timber investments.