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Tax Appraisal vs Actual Value of Land

Updated: Oct 24, 2023



The value of land is an essential concept in the world of real estate, affecting property owners, investors, and developers. Land value is the worth of a specific piece of land. This value can vary greatly depending on multiple factors, such as location, zoning regulations, and local market conditions.


To determine the value of land, two methods are commonly used: tax appraisal value and actual value. Both methods have their advantages and disadvantages, and understanding the differences between the two can help property owners make informed decisions. Taking the time to understand their property values can help landowners make well-informed decisions for their land.


Tax Appraisal Value of Land

Tax appraisal value is the value of a property as determined by the local government's tax assessment office. This value is used to calculate property taxes. It is based on factors like property size, location, and other relevant characteristics. Tax appraisal value has a major benefit: it is uniform and consistent for all properties in a certain area. This means that it can be compared fairly. However, the drawback is that tax appraisal value is based on limited data and may not reflect the current market conditions accurately. Tax assessors may not be able to conduct a comprehensive analysis of all properties in a given jurisdiction.

  • The data used to determine tax appraisal value may be outdated or incomplete. This can result in inaccurate assessments that do not reflect the true market value of a property.

Tax appraisal value may not reflect a property's unique characteristics, like its location or zoning restrictions. These factors can influence its value. The appeals process for challenging a tax appraisal value can be complex and time-consuming, further adding to the potential drawbacks of this method. Additionally, tax appraisal value determines how much the owner will pay in taxes. This means that any owner would likely push the tax appraisal to as low of an appraisal as possible. This may drastically affect the “value” placed on the property in the end despite actual physical factors.

Actual Value of Land

Actual value is the value of a property as determined by market forces such as supply and demand. Unlike tax appraisal value, actual value is not based on a standardized formula and can vary significantly depending on the property's unique characteristics and the state of the local real estate market. One of the main advantages of actual value is that it is more reflective of the property's current market value. However, actual value can be challenging to determine accurately, as it requires more data and analysis than tax appraisal value. There are also some downsides to actual value as a method of determining land value. Actual value is more difficult to calculate than tax appraisal value. This is because it involves assessing various factors, including market trends, property characteristics, and supply and demand. This can be time-consuming and may require specialized knowledge and expertise. Actual value can be subject to fluctuations in the market, which can make it challenging to predict or estimate accurately. Actual value may be impacted by external factors such as changes in local zoning laws or the arrival of new businesses or development projects, which can also make it challenging to determine an accurate value. Property owners often value their property higher to make more money when considering sale prices. This can influence the market value of the property. This also may affect the value seen on the market because of the realtor’s or owner’s interest being involved in the transaction.

Comparing Tax Appraisal Value and Actual Value

The differences between tax appraisal value and actual value can have a significant impact on property owners, as the two values can differ substantially. Tax appraisal value is a standardized method that provides consistency and predictability. However, it may not accurately reflect the true market value of a property. A real estate agent will be able to assist in assessed value and appraised value of land. Figuring out the actual value of a property is important when considering selling or leasing the land. Property based worth can come from the resources that are on the land, especially if the landowner is considering leasing their property.

Comparative Market Analysis to Determine the Value of Land

Something real estate agents do along with a tax appraisal to find the actual value, is a comparative market analysis. A comparative market analysis (CMA) is a tool used to estimate the market value of a property. It involves comparing the property to similar ones in the same area. A CMA is an analysis of properties similar to the subject property.

  • Factors such as size, location, age, and condition are taken into consideration. Other characteristics may also be relevant.

The goal of a CMA is to identify properties that are most similar to the subject property and then adjust for any differences in order to arrive at an estimated value for the subject property. Real estate agents often use a CMA for two purposes: To help sellers decide on a listing price for their property. To assist buyers in determining a fair offer price for a property they are interested in buying. A CMA is not a formal appraisal, but rather an estimate of a property's value based on recent sales of comparable properties. It can be a useful tool for gaining a better understanding of the current real estate market in a particular area and can help inform decision-making when it comes to buying or selling a property.

Using LandGate to Expand Your Land Value Knowledge

LandGate’s LandApp tool makes evaluating the resources on the land easier for landowners and land professionals. In a map view, users can easily identify key parts of electrical infrastructure that are nearby, view the buildable acreage available, agricultural data, soil and mineral types, and more! The location of the land can impact the potential value for specific resources. For example, a parcel of land located near substations or transmission lines will have a high potential value for a solar or wind farm. The further away the piece of land is from electrical infrastructure, the less potential value will exist. Property reports can also be curated for specific parcels of land to show the potential values of resources. This is a great tool for land real estate agents when they are teaching their clients about their land or if they are looking to expand their client base. The eye catching report displays the information clearly while also being fully customizable. Land realtors can add their contact information, their photo and personal information, and their company logo to display on every page.

Determining land value requires a careful consideration of both tax appraisal value and actual value. While tax appraisal value provides consistency and predictability, actual value is more reflective of the current market conditions. Property owners must understand the differences between the two values and take steps to ensure their property is accurately valued to make informed decisions about their real estate investments by using third-party tools such as LandGate.

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