Commercial comparable Land sales analysis is the technique most often utilized to value land. Valuing the land is often more difficult than valuing improved properties since the appraiser cannot consider all three approaches to value. In most cases, the sales comparison approach is the only meaningful option for valuing land. Selecting appropriate comparable land sales is essential when performing the sales comparison approach for land.

Four factors given primary consideration when selecting comparable land sales are: 1) location, 2) size, 3) highest and best use, and 4) date of sale. The often quoted saying regarding real estate is what matters is location, location, location. While location is important in selecting comparable land sales, other factors also merit careful consideration.

Appraisers often adjust for differences in size for properties which are similar in size. For example, it would be reasonable to adjust for differences in size between a one-acre subject property and a two-acre comparable land sale. However, it would not be reasonable to adjust for differences in size between a one-acre comparable sale and a 100-acre subject property. The difference in size is too large to consider the properties comparable. Discerning what size properties are acceptable as comparable sales and can be reasonably adjusted requires analysis and judgment from the appraiser.

Appraisers generally agree that the comparable land sale and the subject property must have the same highest and best use. While there may be extreme cases where it is not possible to find properties which have the same highest and best use as the subject property, it would be extremely difficult to adjust for differences in economic benefit between parcels which have a different highest and best use. Performing a credible and reliable valuation of land using the sales comparison approach requires comparable sales with the same highest and best use as the subject property.

Comparable land sales with a date of sale near the effective date of valuation are highly desirable. However, in most cases the appraiser is required to evaluate the benefit of using sales which are more similar with regard to location and size versus sales which are chronologically more similar to the effective date of valuation. There is no clear-cut answer to determining which sales are most effective for valuing the subject property. In some cases, it is possible to extract an adjustment for market conditions (based upon a matched pair sales analysis) and utilize sales which occurred substantially before or after the effective date of valuation.

The first step in determining comparable land sales should be to locate properties with the same highest and best use as the subject property. Those that are most similar with regard to size, location and date of sale can be chosen from this group of data. Valuing land is often quite straightforward when the appraiser has meaningful comparable land sales.