Summary:
Understanding the factors that influence land values, such as size, location, street frontage, topography, taxation, fees, building prohibitions, and geographic barriers. These factors, along with the state of the economy, significantly influence the demand for land. In an economic upturn, land values soar due to high demand, while in a downturn, the demand for land may plummet, impacting its value.
Interest rates are a key factor in a project’s economic viability. Lower rates can enhance a project’s feasibility, while higher rates can act as a deterrent, affecting the overall financial viability of the project.
Conversely, the same characteristics can restrict land values, including the ‘tenacles of easements’, which are the far-reaching impacts of easements throughout the property, such as restrictions on building heights or setbacks.
Thirdly, Ingress/egress and parking abundance or lack thereof have a great contributory value.
Understanding contributory value is a powerful tool in valuation and appraisal, empowering you to make informed decisions.
Article:
It’s crucial to be aware of the impact of regulations on land value. In states like California, where social engineering is a significant factor, layers of regulations can significantly affect the development potential and, consequently, the value of every land parcel.
Staying informed about new laws is a responsibility that all real estate professionals should take seriously.. In states like California, laws such as SB-4, SB-5, SB-6, SB-7, SB-8, SB-9, SB-10, SB-11, SB-12, and AB-3088 can redefine the right to approve development and significantly impact development requirements.
If a parcel is fixed in its usage and development potential, what does purchasing the parcel next door do for the combined value of the two properties? The additional parcel may enhance the parcel more than its stand-alone value due to the potential expansion of the building footprint and increased parking availability.
The term, contributory, refers to the contribution of additional value. Contributory may be positive or negative when combining two or more parcels to enhance the economic development potential.
Economic development and evaluating contributory value require the expertise of development consultants and highly skilled appraisers. These professionals play a crucial role in the real estate industry, and reliance on their skills could have far-reaching profit or loss consequences.
References:
https://clevelandappraisalblog.com/2021/01/07/how-surplus-vs-excess-land-works/
https://www.workingre.com/excess-or-surplus-land-which-is-it/
https://www.investopedia.com/terms/c/contributoryvalue.asp
https://appraisersforum.com/forums/threads/value-of-surplus-land.196727/