There are many things that determine the value of land.
Simply, it comes down to what the market will bear. Value of land is not set by
the seller, the bank, the real estate broker, or anyone else. It is set by the
The easiest way to
determine whether or not you are paying too much is through an appraisal
process. Most real estate transactions are financed through some type of
lending institution. In the case of vacant land most banks will finance 80% of
the purchase. The lender is the party that has the greatest amount of risk and
will not be willing to proceed with the loan without first having a licensed
real estate appraiser confirm the value of the property.
An appraiser’s responsibility is not to determine the
property’s ultimate value, but whether or not it’s worth what has been offered.
If the property does not appraise you have options. You can put additional
money down to reduce the banks risk, you can cancel your offer to purchase, or
you can renegotiate the purchase amount with the seller.
Until next time,