When purchasing land, your first thought is naturally, “What’s its value?”
The value of the land will not only show how much you can expect to pay for it but later sell it if you choose.
Several Factors Go Into Calculating Land Value
Land value is determined by third parties like your local assessor’s office, who will look at factors like:
- The location of the land
- Improvements made to the land
- The demand for land
- The land’s inherent value compared to neighboring areas
Other factors are also considered, such as what school district it’s in.
The way land is valued will differ from state to state. According to the State of Missouri’s State Tax Commission, “The assessed value is the portion of the true value in money on which taxes are based. In Missouri, the assessed value of property may not exceed 33.3 percent of its true value in money. For real property, residential property is assessed at 19 percent of its true value in money; agricultural/horticultural property is assessed at 12 percent of its productive or market value; and all other property is assessed at 32 percent of its true value in money. Most personal property is assessed at 33.3 percent of its true value in money.”
True value is the property’s fair market value, or how much someone is willing to purchase it for. Land value is not to be confused with site value, which is the reasonable value of the land that doesn’t have anything attached to it like leases or mortgages. Land value increases when the demand for land is high.
Farms And Other Income-Producing Land Is Assessed Differently
For farms, “agricultural economic value,” or its ability to produce income, is a way for the value to be determined. This varies from place to place and what is being produced. For example, cropland typically maintains a premium over pastureland due to higher per-acre returns.
Want to buy land, but you’re not sure where to start? Turn to the experts at Merchant of Homes, who have years of experience buying and selling land for clients at all budget levels.