Land valuations can be carried out for a vast number of reasons, depending on the party involved. A typical example is an owner of a piece of land, who wants an accurate valuation to be able to make an informed choice with regards to selling the land, or what the potential income could be of a planned investment.
Land can also appreciate or depreciate in value over time, meaning landowners may want a recent update on their asset solely for their records.
Here is an overview of some of the reasons why land valuations are requested to shed light on the practice.
When completing company accounting, the valuation of any assets the company owns may need to be declared including any land. As accounting must be accurate for financial and legal purposes, an independent valuation will ensure due diligence.
Acquisition or Disposal
As an asset to either be sold or purchased, landowners or potential investors naturally want to know what the land is worth so that an informed financial decision can be made. In some cases, landowners may wish to wait for the land value to appreciate, or they may require advice on the potential usages based on its condition or status (i.e brownfield sites versus greenbelt sites).
Land that is currently occupied or yet to be built on has the potential to be developed on, depending on its status. To know whether a piece of land is a viable development opportunity, obtaining a valuation will offer clarity for landowners, developers, local councils and investors alike. Crucially, there may be a large difference between the value of the land and its purchase price without such information.
Taking real estate developments as an example, vacant land is often purchased for new housing or commercial developments. Therefore, a developer would want to calculate their return on investment based on the cost of the land as well as the cost of building the property as part of a comprehensive overview of the costs involved.
An expert witness is an individual who is called to court to provide independent, unbiased expertise relating to ongoing court proceedings. In terms of land valuations, our expert witness services can inform a court of the valuation of the land so that the judge and jurors can consider our findings as part of their evidence.
Inheritance Tax (Probate)
Calculating the estate of a deceased person must take into account all of their assets which may include land. A land valuation for probate may be required for the following reasons:
- Obtaining the value of the estate is needed for the probate application
- To calculate whether inheritance tax needs to be paid and if so, how much
- To calculate any capital gains tax, which takes into consideration the value of the land compared to when it was originally purchased
- To ensure that any outstanding debts can be paid and any remaining funds are correctly distributed to any beneficiaries
When seeking a loan either within a personal capacity or to secure more funds for a business, lenders often require security in the form of property or land. If the land has any significant value, then it may be used to secure the loan in addition to or in place of other assets.
Market Value Fluctuations
The market value of all land is subject to fluctuations, which could be a result of nearby developments or inflation.
So while any of the above reasons will factor in the current market value of the land, another purpose for obtaining a valuation could simply be to see if the land has increased or decreased in value since it was first purchased.
The information could then be used to decide whether the land should be left to increase in value before selling, or whether now would be the right time to capitalise on your investment.