How to Determine Land Value Beyond Comparable Sales
Here is something most people misunderstand about the Dallas real estate market: value is not just a matter of what is for sale at the moment; it is also determined by the entire inventory of certain types of properties. Most agents and buyers focus on what is on the market. The more important question is how many properties of that type even exist.
For example, how many one-acre or larger lots are there in Highland Park? There are only 50. All but five are already occupied by substantial homes, and the remaining five are not truly available—they are anchored by architecturally significant homes that have been extensively renovated.
Six months earlier, leading appraisers and agents were confident that Highland Park land was worth $15 million an acre. As the conversation shifted from what was available on the market to what actually existed, and as these constraints became better understood, perception changed. And when perception changes, value follows. We are now seeing lots selling for more than $20 million an acre.
Many assume there are 200 or 300 half-acre lots in Highland Park when, in fact, there are closer to 60. This limited number makes the off-market Highland Park and University Park half-acre lots I identify for clients even more compelling. This understanding of the entire inventory helps sellers determine the right price and helps buyers recognize real value when they see it.
The value of land is not determined only by the most recent comparable sale. It is also determined by how many comparable properties actually exist, how many are truly available and how strongly buyers desire them.
This Highland Park case study shows that when scarcity is understood, perception changes—and when perception changes, value follows.
Discuss Representation of an Architecturally Significant Home with Douglas Newby
