How do you even price a piece of dirt with no comps?

Question

Everything I know about valuing property comes from rent rolls and expenses on my two small buildings. Land breaks my brain.

Someone at a meetup told me he puts raw land under contract at around 30 cents on the dollar. Thirty cents of what, though? The county assessor has a 9 acre parcel near me at $41,000 and Zillow shows no estimate at all. There are two vacant listings within five miles and both have been sitting forever, so I don't trust the asking prices either.

So when a land wholesaler says "below market value," what number is the market value being measured against?

Rena Guide · Accepted Answer

Market value for land means what similar parcels have actually closed at, and the comparison set is narrower than it looks. You want sold vacant land in the same county, similar acreage, similar road access, and the same zoning classification. Then you reduce to a price per acre and apply it to your parcel.

The assessed value the county publishes is for taxing purposes and gets updated on its own schedule, so it can sit well above or below what a parcel would sell for. Treat it as a data point about the tax bill rather than a value.

Sold prices are the harder part. Roughly a dozen states are non-disclosure, meaning sale prices are not part of the public record, so in those states you either need MLS access through a licensed agent, a paid data provider, or a friendly broker who will pull vacant land solds for you.

One thing that catches new land buyers: two parcels of identical size in the same zip can differ enormously in value because one has legal access to a public road and the other doesn't. A landlocked parcel reachable only by crossing a neighbor's property has a small buyer pool and sells for a fraction of the per acre number. Before you anchor on any comp, check the parcel map for frontage or a recorded easement. That single question explains a lot of the "why is this so cheap" listings you'll run into.

ryanmck27 · Answer

Working through my licensing coursework now and the land section was mostly about sold comps, same as houses. You pull closed vacant land sales in the same county, get to a price per acre, then adjust for the stuff that moves land: paved road frontage, whether power is at the road, and acreage size. A 9 acre parcel almost never sells for the same per acre number as a 40. Asking prices on stale listings tell you what sellers hope for and nothing else.

megan_doyle15 · Answer

Wait, so a parcel can just have no legal way in? I assumed if it's on the map there's a road. That's alarming.

Rena Expert · Answer

Price per acre stops working as you go down in size. Below about an acre, especially in platted subdivisions, land trades per lot, and a 0.25 acre lot and a 0.5 acre lot on the same street can close within a couple thousand dollars of each other because both hold one house. Run per lot comps there and per acre only once you're into real acreage.

The adjustment cairn should worry about most isn't frontage, it's utilities and septic feasibility. A rural parcel with power at the road and soil that will pass a percolation test for a conventional septic system is a different product from the parcel next door that needs an engineered system. Buyers price that difference in the tens of thousands, and it isn't visible on the GIS map. Whether a perc test is even required, and who can perform it, varies by state and often by county health department.

Second thing: in counties that get heavy direct mail volume, some of your solds are other investors' purchases, which are already discounted, and some are retail sales to buyers who found the parcel through an owner-financed listing at two or three times market. Both pollute a small comp set. With five closed sales in a year you're not averaging, you're guessing, so widen to similar counties before you widen your acreage range.

Also price in time. Land can carry six to twelve months of marketing at retail, which is exactly why an end buyer expects a discount from you.

How do you even price a piece of dirt with no comps?

4 replies