What You Need to Know About Land Valuation
Would you like to know the exact value of your land?. Today we will help you understand how to go about the land valuation process. Just the way vehicle valuation allows an owner to know the exact value of a car.
Valuation of land is simply the procedure of analyzing land to determine the exact current market value. Valuation of land comes with various benefits. It helps you to;
- Know how much you can resell the land
- How much money you can acquire as a loan using the land as collateral
- Helps in calculation of taxes in cases of payment of stamp duty to tax authorities
- Calculation of lease value
At first, we will understand the professionals involved in the valuation of land. Factors put into consideration during valuation, then discuss valuation methods, tips to prepare for valuation of land. Later steps of land valuation and the cost of valuation of land.
Let’s get started!
Professional who conduct land valuation
- Land Valuer – Land or property value is a professional responsible for estimating the market value of land for the benefit of the landowners.
- Surveyor – land surveyors are professionals in charge of determining and updating land boundaries and measurements
Factors considered during land valuation
a) Location of the land
We all know that location is everything when it comes to land ownership. As such, the value of property in a city such as Nairobi has more value in comparison to properties in a rural area or a suburb of a city.
Also, a property touching tarmac or near an industry, a school, or a major development will definitely be of high value compared to one in an area without developments.
b) Type of land
The main types of land area are residential, commercial, or agricultural. In most cases, commercial land is of high value due to the income-generating factor in comparison to agricultural land.
Therefore, before conducting a valuation on land it is recommended to classify it.
c) The size
Different sizes of land have varying valuations. However, in some cases, an eighth-acre plot will be of higher value than an acre or more depending on the type of land, location, and usage.
Therefore, do not fall into the temptation of assuming that the valuation of a big chunk of land can be higher than a smaller piece. The value of land highly depends on the land itself and the developments on the land
d) Amenities on the land
Availability of amenities on the land has a direct impact on the valuation. A developing area with schools, hospitals, markets, water, and power supply will have a higher valuation.
e) Accessibility
The value of land also depends on its accessibility. If a plot of land is not easily accessible or if the access road is not wide enough, it will be valued lower as compared to a more accessible one.
f) Floor Space Index (FSI)
This is basically the total floor area of a building that can be built on the land during development. The value of land also depends on FSI or in other words on the total floor area of the building that can be built on the plot.
g) Soil type
Soil type is another factor during valuation, commonly, it is referred to as soil bearing capacity. This directly affects the cost of building foundation where a good soil does not cost much while poor one requires more resources during development.
Therefore, land with good soil bearing capacity will be priced higher.
f) Environmental factors
Factors such as erosion, flooding, landslide, and other adverse environmental factors are put into consideration when calculating the value of the land.
A land prone to these factors can be valued at a lower price.
g) Special advantages on the land
If the land has special advantages because of its location or any other reason, they are also put into consideration during the valuation of land.
Methods of Valuation of Land
There are various methods of conducting the valuation of land and we are going to discuss them one by one
a) Comparative
This method is common in most areas where the value of land is done by comparing it with the current land selling prices around an area. It is more practical in an area where prices of land are easily available due to ongoing selling and purchase of land properties.
The property valuer needs to be keen when checking the averages to ensure they do not overestimate or underestimate
b) Development
Thus types focus on the potential of land in the near future. For example, the possibility of building flats, apartments, industries, upcoming road infrastructures in the area, etc. The land valuer appraises the land using its potential
c) Belting
This method values the land based on its proximity to the main road commonly known as depth of land. The close the land is to the main road, the higher it is valued at and this is what belting is. The main disadvantage with belting valuation is that land far from the main road is valued low.
d) Guideline Value
The guideline Land Valuation method is whereby the government provides the rates of valuation for every area. This is helpful when determining stamp duty to pay.
Tips to Prepare Your Land for Valuation
As a property owner, it is important to prepare well before the valuation of your land begins. Below are some tips to help you prepare.
i) Gather your land documents
The valuer will request land ownership documents such as title deed, certificate of the lease, or any other related document such as a personal market appraisal of the land that you may have conducted.
ii) Conduct a personal research
It is advisable as a property owner to have a personal review and comparison of prices of land within your area and have an estimated value of your land. This will help you have a rough estimate of the value of your land.
iii) Have a list of the features of your property
Highlight all the features inside and surrounding your property as this will be useful when determining the value of the land. These can include the fence, water availability, electricity connectivity, proximity to amenities, etc.
iv) Ensure you are available during valuation of your land
It is crucial to be available when the valuation of your land is being done. You can set apart a day or two to focus on the valuation of your property.
Steps of Conducting Valuation of Land
1) Understanding the purpose of the valuation
The first thing you need to understand is the purpose of the valuation. Is it for long-term benefits or immediate benefits such as using the property to take a loan or selling the property right away? Once you identify the purpose you can go ahead with the valuation
2) Agree on terms of reference with the valuer
At this stage, the property owner and the value agree on the objectives and scope of the valuation which will form a contract between the two. This will help determine the valuation of the land method to be used.
3) Property Inspection
Under this step a thorough inspection of the land to determine the available amenities begins. This is where the owner also prepares all the documents required for the valuation process.
4) Land valuer collects data of the property
Alongside the information you have provided as the property owner, the land valuer will also collect data on the property to discover more details and also prepare the land valuation report.
5) Submission of the report
Once all details are compiled, the land valuation report is prepared and subdivided to you as the property owner.
Steps to take when you disagree with your land valuation report
At times as the property owner, you may disagree with the outcome of the report based on the survey you had done yourself. Therefore, there are 3 steps that you can take as listed below;
- You can submit an objection to the land valuer and provide additional information about your property that should have been considered.
- Recommend the use of a different valuation of the land method. For example, if the valuer used the belting method where proximity to the main road was the factor, you can recommend a comparative or development method that puts into consideration developments in the land and also the average prices of land in the area.
- In case the land was affected by floods or erosion and the value still remains high, you can still recommend are evaluation putting into consideration the environmental factors.
The estimate cost of valuation of land
To begin with the minimum amount, you can pay for valuation is Ksh 15,000. There is a Ksh 5,000 rate per hour when doing valuation consultancy.
The cost of the valuation depends on the property in question. In the case of compulsory land acquisition by the government the rate is 2% of the first amount worth Ksh 2M with a deposit of 0.5% of that amount.
For land in an urban area, the rate is 1% for land worth Ksh 2M and a deposit of 0.25% of the amount needs to be done. Valuation for a rental property with an average income of Ksh 400,000 per year is 10% with a deposit of 5 %.
In conclusion, professional valuation of the land is the best way to determine the exact value of your land. Therefore, I would advise you to consider undertaking this important exercise. Check out our next blog on how to select a property valuer
10 Simple Ways to Increase the Value of your Land
Fence the plot
This is one of the easiest ways to improve value of the land. There are various types of fences that you can consider depending with your budget; natural fence, chain-link fence, stone wall, bricks, wood etc.
Plant Trees
Planting trees not only adds privacy but beauty as well and also fresh air. When you plant them make sure their placement does not block any scenic views that your property offers or limits developments.
Landscaping
Landscaping can greatly enhance the value of your land. With proper planning, creating wonderful landscaping does not have to be costly. Some types of trees and flowers when well-landscaped can great a great appeal.
Consider having a tentative master plan of the plot
You can have a simple plan on how someone can utilize the plot maximally for example, the best size of a house, garden, parking, gate etc. A plot with a plan in place has better value to any buyer.
Make the plot accessible
Not having a good access can limit the amount and type of buyers you will attract. Do whatever you can to make sure accessing the property is as easy as possible. Making it easier to access the property makes it much more appealing. vi.
Clearly mark the gate of your plot
The entrance to the property is one of the first things a client will see, so you want them to create a good first impression. Gates can also protect your property from trespassers. You can have a standard size mark to accommodate any future needs.
Add some utilities
Some utilities include electricity connection, water connection, sewer system, etc. This can in a great way add value to your plot. viii. Have the boundaries of the plot clearly marked – this will make it easier for someone to identify the exact location and size of the plot. You can have 4 boundaries markers on the 4 corners.
Make the plot appealing in general
This includes removing junk and garbage, clearing shrubs, pruning trees etc.
Have a plan for drainage
If the land does not drain well or holds onto standing water from heavy rains, the value of your property will decrease as a result. Ensure water and other wastes are well planned for.
Have something to say or ask on the valuation of land? Please comment below.