Figuring Price Per Acre is a Useless Calculation and Waste of Time

Real Estate Agent with Long and Foster Re Inc RS207329

This is great information for those clients considering buying or selling a lot.  Thanks, Jeff for this terrific explanation.  I know it will assist us all.

Original content by Jeff Pearl

I get potential buyers and even agents coming up with values of what they think this lot or that lot is worth after they did some figuring of prices per acre based on other land sales. ( Comps). It's so comical to hear their reasoning it's sometimes hard to resist just hanging up the phone on them. They will be looking at a 3.7 acre lot, and then mention they saw a nearby 12 acre lot that sold for $210,000.00. So they divide 12 into $210,000.00 and come up with $17,500.00 per acre. They then begin to tell me something along the lines of- Even if we rounded that 3.7 acre lot up to 4 acres, that still only comes to 4x $17,5000.00 = $70,000.00. Then they ask how I came up with a listing price of $141,000.00 for a 3 or 4 acre lot. I actually can't believe that they think I am going to try to explain it to them.

 If they turned it around for example. I know there are several comps in the MLS for 3-7 acre lots that sold for $130,000.00 ( Obviously they just ignore those), but anyway, using their price per acre thinking. $130,000.00  divided by 3 acres= $43,333.00 per acre. So would these same agents and potential buyers go look at a 10 acre lot and say, well a nearby 3 acre lot recently sold for $43,333.00 per acre, so that should mean this 10 acre lot should be worth $433,333.00

 I'm pretty certain I can buy a decent house on 10 acres for $433,00.00.

Even if you compare lots of the same size, still price per acre calculations don't work except when all lots are equal. Eight 3 acre lots in the same zip can all have a different combination of factors that affected their value. Here is just a partial list- HOA's, Covenants, easements, Flood plains, streams and creeks, well or not, set backs, topography, views, zoning, clearing restrictions, mountainside overlay, limestone overlay, closeness to highway, noise form train or traffic, neighboring property, type of drain field, location of drain fiield, design requirements of drain field, access to power, is underground or overhead power lines required, fencing, trees, length of driveway, culvert requirements, road maintenance agreements, potential for future subdivision, results of compaction tests, etc. Even access to high speed internet has a value to many people. I actually had an agent call me recently and for some reason he thinks because land use to be farmland, it is somehow worth less than if it was previously used for some other purpose than farming.

Are these 2 adjacent lots worth the same dollar amount per acre? No. Not even close.

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Jeff Pearl / Lic in VA

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