I am glad you ask! I specialize in ‘land brokerage’ and
as a result look at large tracts of land. Landowners ask me to give the owner
an opinion of value, in other words ‘What is my property worth’? It can be difficult at times. I have several
friends who are appraisers and we bounce ideas off each other. With the
downturn in the market, beginning in 2007, sales have become less frequent, so
it can be difficult.
There are two processes at work when dealing with large
tracts of land.
1. There is an inverse relationship between
tract size and price per acre. I look at it as an ‘economies of scale’. The
buyer is rewarded for his ability to purchase large tracts. The number of
potential buyers decreases as the total
purchase price increase. In other words, there are more people who can afford
an acre lot verses the number of people who can afford a hundred acre tract of
land. The pool of buyers shrink. For example... an acre lot might cost $25,000 per acre, a 25 acre tract might cost $4,000 per acre and a 100 acre tract might cost $2,500 per acre!
2. Contribution of improvements diminishes as
tract size increases. Intuitively you would think you could simply add all
the components together i.e. house, barn, pond, fences and acres and establish
an asking price. It does not work that way. A house on 5 acres may be worth
$200,000. That house on a 100 acre tract might be worth $125,000 and that house
on a 1,000 acre tract might have very little contribution value.
For Information on Buying or Selling Land contact G.
Kent Morris, ALC, RF at (706) 457-0090
