Real Estate Question?

May 15, 2009 5:00 AM

Hi y'all; I always wanted to know ratio price of the land vs a house meaning. For example, if one buys a house for $150.000 how much approximately does he pay for a house and how much does he pay for a piece of land on which the house is errected? Is there anywhere some calculator or web site that can figure this one out? Also, I wanted to know when one pays escrow on mortgage meaning paying taxes who collects that is it county, state or federation? Please help?
posted by xmradio03 to Law & Government (16 answers total)

The ratio can vary wildly, depending on the value of the land. There are areas of the Nevada desert, which are very remote and utilities are hard to come by. Land is very cheap. Building a house in an area like that will result in a low land to house value. Alternately, there are areas where land is very expensive, say ocean front property in California, where very small city lots can sell for incredibly high amounts. In these areas, land value to house value in high. It all depends on the local market, size and quality of the land and the size and quality of the house. A local residential real estate appraiser should be able to give you an idea for your area.
posted by ActingTheGoat at 5:16 AM on May 15, 2009 [2 favorites]

There is no set ratio or constant, at least where I live (Canada). When I bought my house, for instance, it was on a double lot in a mid-sized city, and the land was worth as much as the run-down house on it. Now that the house has been renovated, it is worth three times as much as the land it is on. Any fixed ratio would be... well, not very sensible, as the property is a stable asset (barring natural or nuclear disasters) and the structures on it are more temporary assets, subject to both improvements and degradation.

This is detailed on my municipal tax bill, which tallies the estimated value of my house and my land for a taxable total. Getting these en masse would let you, with lots of work, figure out an average home cost, average lot cost, and average ratio for a large area.
posted by Shepherd at 5:40 AM on May 15, 2009

The location matters alot but also the size of the land, the size of the house, construction, etc can all change the ratio. I don't know what constitutes a standard lot in your area but in my neighborhood a standard lot is 40x120 feet. My house is 2230 SF and the land value is about 20% of the assessed value. But land value pretty much stays constant whereas the building value can change more often.
posted by JJ86 at 5:44 AM on May 15, 2009

Appraisers use three methods to establish value:

Replacement cost
Income
Market

Replacement cost can be calculated roughly by the square foot based on current norms in an area for specific construction types and quality levels.

Market value compares what similar properties actually sold for.
(For completeness, income approach values the property for what it would rent for and there are a number of ways of turning that net income stream into an equivalent principal value.)


There is no tie between these items. If you are fortunate enough to live in an area where the market value of a property is greater than the replacement cost of the structure on it, then you can estimate the market value of the land as the difference. Other factors come into play, of course, since all land value is impacted by its location, and all land has but one location.

Not a simple question. Best bet is to use a certified appriaser and see if you can get a number that serves your purposes in a supportable fashion.
posted by FauxScot at 6:03 AM on May 15, 2009 [1 favorite]

As for the question of property tax, that is generally paid to the city or the county the property is in, depending on if the area is incorporated or not. Also, in the US, local school districts, which are separate from both cities and counties, can have the power to levy property taxes.
posted by ArgentCorvid at 6:03 AM on May 15, 2009

UK data point from "The Housebuilders Bible" - my edition is a few years old: expect the land purchase price to be about 1/3 of the overall cost of building a new house.

Over here the optimum way of making money as a land seller is usually to sell the land with outline planning permission for as many properties as can fit on it. So those who would like to build a house on a large area of land often have to buy up several plots.
posted by rongorongo at 6:07 AM on May 15, 2009

There is also the complicating case of "difficult" lots. Nowadays in expensive suburban areas there are many lots that were once considered unbuildable that are now worth buying cheap and spending a lot of money to upgrade to buildable. How do you value that lot once a house is built on it?
posted by smackfu at 6:11 AM on May 15, 2009

My local government has a GIS site that allows you to look up properties by address and shows various information about the property, including the value of the land and the value of the "improvements" and "structures". These numbers are based on the most recent tax appraisal. You might want to google around and see if you can find something similar for your area.
posted by ashirys at 6:29 AM on May 15, 2009

Of course, it is going to vary depending on the location of the land. But every house appraisal I've ever had done spelled it out right at the top of page 1. If you aren't in a position to get an appraisal, you could sort of ballpark it by looking at how much empty lots are going for in the area vs. how much houses on similar lots are going for. Some counties have sales records online that you can browse.
posted by spilon at 7:01 AM on May 15, 2009

good answers above. Basically, since every piece of land is literally unique, there is no simple formula for determining value of the property or its improvements. Appraisers use a rough average of three different methods, as FauxScot mentioned. For your purposes, the easiest way to approximate the value of your raw land is to look at similar properties in the area, both with and without improvements. Be careful to adjust for differences i.e. utility access, views, size, proximity to schools and other services, and so on. The other way you could figure your home value is to find out how much it would cost to build that home today (minus depreciation from weathering and so on). The difference is your residual land value.
posted by Chris4d at 9:17 AM on May 15, 2009

as mentioned, it really depends on the area. Here (Buffalo, within city limits) the land is almost worthless. In some areas it IS worthless- literally. Like, you get a house on the East side, it has a vacant lot next door owned by the city, you can have the lot for $1. Doesn't even cover the paperwork to change the owner on the city's side, since the land is worthless.

Houses here that go for 200,000 or so might be a million dollar home in some areas, restored victorians mansions and the like. The land's low value drags the whole house value down with it. In a case like that you can almost say the land has a negative value.
posted by Kellydamnit at 9:45 AM on May 15, 2009

Response by poster: OK, thank y'll guy for advice!
posted by xmradio03 at 9:51 AM on May 15, 2009

2nd all the above. Here's a specific example. Here in Denver, Washington Park is a highly desirable neighborhood. A small home on a 50'x125' lot can sell for 350,000 to 400,000. Frequently, these homes are demolished to make way for large homes.
In practical terms, that sets the value of the lot at 350,000 to 400,000 and the value of the home itself at $0.
As you know, when a house is sold, the land value is included implicitly in the house price. You will almost never see land value expressed separately. The house mentioned above may be listed for $250 to $300 per square foot, but in fact, the value is carried almost entirely by the land.
If you live in an economically active region, a practical way to get real land value is find out the price of "scrape offs" in your neighborhood.
Assessed value is a start, but it may not be accurate.
It is advantageous to the real estate industry to obscure land value in this way. It's way easier to sell crappy new suburban homes if the (poor) land value is not obvious.
posted by Carmody'sPrize at 9:54 AM on May 15, 2009

Another contributing factor: what the current zoning allows as-of-right and/or whether a variance or conditional use permit (which would allow a more valuable use) is easy to obtain for that area in that community.
posted by carmicha at 10:24 AM on May 15, 2009

Also, I wanted to know when one pays escrow on mortgage meaning paying taxes who collects that is it county, state or federation?

Depends on the taxing authority. I don't live in a city or town, so my property tax escrow is collected by the mortgage company, and divided between the township, the county, the local school system, and the fire/ambulance authority. If I lived in town, I wouldn't pay township taxes, but there would be a city tax.
posted by jlkr at 11:31 AM on May 15, 2009

Our county property appraiser's website breaks down the (just) market value of any property between the land and the improvement (house. etc). Check out your local governmental authority's property appraiser's website.
posted by Jezebella at 12:37 PM on May 16, 2009