I had a conversation today with a gentleman whose mother owns some property surrounding the intersection of two state roads -- one a four-lane limited-access type and the other a conventional two-lane road. The question that comes up, which is quite common, is 'how much is it worth?'
The reason they need to ask isn't because these folks don't know what land is going for in the area; they do. When I first met these folks it was just last week at an auction for land just down the road from theirs. The bare land tracts there were a good barometer for general unimproved land values in the area. To a certain extent you can extrapolate the values across different-but-similar tracts of land to satisfy the question. Realtors and appraisers do this all the time in the form of comps -- comparable sales.
The reason they need to ask the question is because when land is making the transition from one 'best use' to another, looking at either use individually can make for a confusing picture. The land in question has historically had its best use centered around agricultural practice. It's good 'ole farmland. Due to the development of the transportation infrastructure it may now have merit in a commercial or residential use. From the sellers perspective, there are pros and cons to such a transition. Most relevant is that a commercial buyer (developer) would generally see the acquisition cost of the real estate as a smaller percentage of the overall project budget for improvements at a location and therefore might be able to offer a premium price. The downside is that finding those strong commercial buyers generally takes more time. As such, taking transitional properties to auction will flush all of the commercial buyers in the current market into auction at the risk of missing the bigger fish entering the market down the road. So it really is then a matter of priorities.
Is a bird in the hand worth two in the bush?
