How to price raw land? (assess, permits, county)

[Arktikos]

There may be some perceived minimum value of an oceanfront lot, regardless of acreage, that's in play here, which would account for the higher cost/acre of the smaller parcels.
This is arguably a logical approach.

[hotzcatz]

Actually, if you look at the way land is bought and sold, it would be more surprising if there was a logical common denominator than the current chaotic way things seem to be.

There's a huge difference between each parcel, even those in the same 'subdivision'. Add in that each parcel was most likely bought at a different price and has been bought and sold several times since then for a whole bunch of different prices. Then add in that there's how many different real estate agents? And how many different sellers?

So some seller bought at the top of the market and he talks to some hungry real estate agent that wants it to sell for a high price so the agent can get a bigger commission. He tells the owner the property is worth a whole pile and doesn't care if it doesn't sell right away. Then on another parcel, (maybe even next door to the first one) someone bought decades ago, then died and their heirs have it and just want to sell it fast. They find a lazy real estate agent that talks them into a low price so it will sell quickly and painlessly. Less commission for the agent, but less work.

So, of course the prices aren't going to make any logical sense, because they don't.

[rhbj03]

Originally Posted by Blind Cleric

There may be some perceived minimum value of an oceanfront lot, regardless of acreage, that's in play here, which would account for the higher cost/acre of the smaller parcels.
This is arguably a logical approach.

I think that is an absolutely valid point. Which, is why some 5000 sqft oceanfront lot with all service hookups are also sell for $200K+.

Following this logic, and using the listing most advantageous to buyer (8.75 acre asking 350K) which should be where the market is today, I think we can roughly derive the following price formula for THAT SPECIFIC STRETCH of coast:

1. Price for the 1st half acre:
2. Price for the additional half acre:
3. Price for the 2nd additional acre:
4. Price for the 3rd additional acre:
5. Price for the 4th additional acre:
6. Price for the 5th additional acre:
7. Price for the 6th additional acre:
8. Price for the 7th additional acre:
9. Price for the 8th additional acre:
10. So on...

And with that, assuming everything else is equal, which I believe they are, we can figure out the fair market value for the other parcels, regardless of what the owner might be thinking or what the cost basis is.

I'm gonna crunch my numbers (need to give it some thought) then come back to post here for comments.

[pj737]

Originally Posted by rhbj03

I think that is an absolutely valid point. Which, is why some 5000 sqft oceanfront lot with all service hookups are also sell for $200K+.

Following this logic, and using the listing most advantageous to buyer (8.75 acre asking 350K) which should be where the market is today, I think we can roughly derive the following price formula for THAT SPECIFIC STRETCH of coast:

1. Price for the 1st half acre:
2. Price for the additional half acre:
3. Price for the 2nd additional acre:
4. Price for the 3rd additional acre:
5. Price for the 4th additional acre:
6. Price for the 5th additional acre:
7. Price for the 6th additional acre:
8. Price for the 7th additional acre:
9. Price for the 8th additional acre:
10. So on...

And with that, assuming everything else is equal, which I believe they are, we can figure out the fair market value for the other parcels, regardless of what the owner might be thinking or what the cost basis is.

I'm gonna crunch my numbers (need to give it some thought) then come back to post here for comments.

There are hundreds of millions of acres of land in the US that are worth nothing... meaning that the land is more of a liability than an asset. Think about the ongoing maintenance that may be required for that land and other liability aspects (squatters, illegal dumping, rainfall/storm runoff, rockslides, firebreaks, additional property taxes, higher insurance etc). If the land is not arable in its current state and cannot accommodate additional housing units (due to zoning or other conditions), the additional land may be worth nothing or may possibly even diminish the value of square footage in other areas of the parcel.

There are so many variables based on conjecture in determining the "true" value of land, particularly rural land on the Big Island. And even when you determine the true value (in your head), there may be someone willing to pay twice that amount... and another that thinks you paid more than double what it's worth. I would think the only way to get any kind of reasonably worthwhile feedback on what the land may be worth is to live there for a while, become intimate with the area and get information about closed transactions on similar properties over time. Otherwise, you'll be taking a bit more of a gamble.

[WaikikiBoy]

Originally Posted by pj737

I would think the only way to get any kind of reasonably worthwhile feedback on what the land may be worth is to live there for a while, become intimate with the area and get information about closed transactions on similar properties over time. Otherwise, you'll be taking a bit more of a gamble.

This is why you would likely be better off spending your time researching realtors on the Big Island to find one with whom you trust and can build a working relationship. They will be far more familiar with land, areas and values than you will be trying to figure it out from the mainland.

The bottom line is that more land doesn't necessarily mean a higher price. And simply taking the largest parcel and determine its price per acre and using that to try and justify lower prices on smaller parcels just isn't the way it works most of the time.

I'd suggest finding a good realtor and learn from him/her. In absence of that, decide what it's worth to you based on your research and write your offer, share your reasons for your price point, and see what feedback you get from the seller.

The best barometer for pricing is recent closed sales of similar properties. A realtor can get those for you.

[terracore]

"There are hundreds of millions of acres of land in the US that are worth nothing... meaning that the land is more of a liability than an asset."

True. But most homeowners insurance policies include liability insurance on vacant lots that you own. This is not widely publicized. The number of vacant lots covered by your homeowners insurance varies by insurance company. We've had two different homeowners insurance companies (a major brand and less recognized brand). The major brand covered one lot, the less recognized brand covered two. We didn't own more than two at the time so no idea if they would cover three or more. The kicker: You have to give them them the TMK info for the vacant properties for them to be covered, it's not automatic.

[rhbj03]

Originally Posted by terracore

"There are hundreds of millions of acres of land in the US that are worth nothing... meaning that the land is more of a liability than an asset."

True. But most homeowners insurance policies include liability insurance on vacant lots that you own. This is not widely publicized. The number of vacant lots covered by your homeowners insurance varies by insurance company. We've had two different homeowners insurance companies (a major brand and less recognized brand). The major brand covered one lot, the less recognized brand covered two. We didn't own more than two at the time so no idea if they would cover three or more. The kicker: You have to give them them the TMK info for the vacant properties for them to be covered, it's not automatic.

Can you elaborate on what liability I have if I own a vacant lot, such as in this case an oceanfront property? (Someone trespasses onto the property and gets bitten by a poisonous centipede? Falls into ocean? Falls from a tree?)

And does this inclusion you mentioned cost any additional money?

[terracore]

If somebody trespassed onto your land and fell into a puka and broke their leg, they could sue you.

"And does this inclusion you mentioned cost any additional money?"

My insurance company doesn't charge us anything to extend our homeowner's liability insurance to also cover our vacant lot. YMMV.

[rhbj03]

On the county property website, I find the following info:

Two most recent parcel sales:
Date Price Reason
06/03/2004 $ 340,000 0
05/07/2002 $ 227,500 4


Any one knows what the numbers in the "Reason" column mean?

[terracore]

Try providing a link. When I look at the assessor database the only category with a "reason" field is for permits.