How To Find Land Value?

Question

I'm starting out in wholesaling and I have a seller looking to sell a property where the home had a gas explosion and is completely destroyed. I tried getting a price out of the seller, but they have no idea and are completely lost in the whole situation. It's in a very nice neighborhood near a golf course and great schools. Homes in the area are selling for around $450k-$500k depending on size (3k+ sqft, 3bd+, 2ba+). I haven't called any builders and plan on doing so, but I just wonder if there is a quick, dirty way for me to get an idea on the land price outside of the land value on county website?

Damon Owens · Answer

Daniil Kleymann (@RehabValuator on YouTube) has a couple nice videos on how to do this. It’s a multi step process and he does a great job walking the viewer through the process.

Ke Nan Wang · Answer

There are a few ways to valuate land.

First determine zoning and find out exactly what you can and cannot do about this piece of land. Your local planning and zoning department is your friend. Go to their office, introduce yourself and become friends with them. Show your charm. Ever watched Better Call Saul and saw how Jimmy deal with the lady at the court, that's the level you need to be with the staff at the planning and zoning department if you are serious about this. A bit kidding but that should be your mindset.

In my city, multifamily zoning is very rare find so if a residential land is zoned Residential General (RG) where you can build multifamily houses on, that's extremely more valuable than a residential lot only Single Family Residential House (SFR) is allowed.

Usually you want to find out the utility availability to the property. But in your case, since there is existing house, I assume they are available. In our area, city water and sewer are more valuable than well and septic.

Once you have gathered the above info, now you can go check out comparable.

Basically just search any land in the neighborhood that's being sold recently and calculate the price per square footage on the land. You will find that they are very similar. There are certain thresholds that will take your land to the next level. Again, since this lot already has a house on it, so don't need to go into this in detail here.

Also in our county there is a thing called Impact Fee. It's in the realm of tens of thousands dollars if developing a new lot. If there have been existing improvement on the land, whoever is building a subsequent house doesn't need to pay impact fee. And that's value to a developer/builder/owner depend on whoever is setup to pay that impact fee. Not every municipality called it the same term but there will always some kinda fee to pay to the county/city if developing an unimproved land the first time.

Land sales are in pretty wide swings. I have seen owners listed land for double its value and sitting on the market over years and eventually took a offer that's 50% to 60% of the listed price. There are number of land owners don't need to sell land fast so they are willing to list an unrealistic number and hope one day the market will catch up to it.

Think this will get you going. Basically just check on recent sales in the neighborhood should get you started.

You can talk to builders but I wouldn't take much input from them seriously unless they are very reputable and are building exactly the house you want them to build. I have had builders who gave a land purchaser a "shoot from the hip" price when they were asking about the land, once they got it under contract and the builder came back with double the price to build the house. And that house was never built. 99% of the builders in our area are crap. Everyone I've talked to who hired a builder to build their house, none of them recommended their builder. Everyone is like "I would never work with them again." I'm a builder myself and I don't blame them. It's a high risk business and if you play the game of "racing to the bottom," to survive in the business, you either cut corners and build crappy houses or you just stop showing up. The correct way to quote a house is have a construction plan in hand and understand exactly what your customer is building, do the takeoff and get bid from reputable subs. Then do a proper markup on the job. Whoever shoot from the hip and do a price per sq ft price won't be very reliable.

Chris Martin · Answer

@Blake Grzybowski Make sure you know that this was a gas explosion and not something else, like a meth lab. I see a few red flags. #1) a total loss would be covered by insurance and the seller would most likely have already received a settlement check. #2) the seller says about lot price "they have no idea and are completely lost in the whole situation", well, this statement is hard to believe. Ask for the insurance settlement paperwork and they will have a lot price identified.

This doesn't look like a good 'wholesale' opportunity in my mind because you need specialized professionals to get value out of the deal. But without knowing where you are it's just my speculation.

Justin Hammerle · Answer

@Blake Grzybowski - just a side note here outside of valuing the land.  If you had a gas explosion you could have a situation where you may need soil remediation; this can be very expensive and absolutely destroy the value of a lot.  Just something to keep in mind if its not on your radar.

best of luck

Tommy Adeoye · Answer

Another option is to look at the property's assessed value on the county website and subtract the estimated cost of demolishing the destroyed home and any other cleanup costs and 15% unforeseen. The assessed value may not reflect the true market value of the property.

Justin Hammerle · Answer

I would contact the city first to see if they are going to require testing prior to issuing a permit or C/O because of the explosion.  If they do, then you would have to contact an environmental agency that could drill into the soil and give it a clean bill of health.

Jay Thomas · Answer

It sounds like this property has great potential and is in a desirable location. I would recommend getting in touch with some local builders to get an estimate on the cost of construction of a home on this lot, then coming up with an offer that you feel comfortable presenting to the seller. Good luck!

Caroline Gerardo · Answer

City will not do testing you pay for any testing and mediation - was it soil subsidence (sinking that you need to dig out and fix), was it improperly an installed meter, was it an old propane heater, was there asbestos in the house that exploded?, need the cause and perhaps contact the insurance company who might not tell you the whole story as it pertains to the liability towards neighbors...

Caroline Gerardo · Answer

Lookup

Porter Ranch; gas meters in snow; house gas explosion...

3000 square foot house you say at $150 a foot = $450000 value maybe the lot is worth $50000 less permits $9000, inspections $1500; plans/ specs/ $10000 fixing the meter or what caused the leak unknown; maybe the lot is worth $30000 or less.

You cannot build a golf course style lux house for $150 a foot it will be closer to $350.  $350 X 3000 = house is not going to sell for a million in a neighborhood of $450000.

Their insurance company gave them an appraisal and they know the dollar amount number. They pray you offer them more.

Is the lot scraped and ready to go? Is sewer line okay?

@Ke Nan Wang gives you the first step. Find out the whole story as to cause and what the planning department allows.

Seller is going to need to finance the lot for two years for you to get architect's plans, specs, costs, inspections, approval to build...

Conventional lenders don't do a $30000 small lot loan.

I doubt planning is going to let you build a 4 plex in a community of SFR on golf course. Neighbors show up with flaming torches at the conditional use permit hearing. Nimby neighbors are not fun. You need to negotiate and bake banana bread for neighbors before you pay an architect if you dream of adding units to an established old golf course neighborhood.

How To Find Land Value?

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