The appraisal of development lands typically represent properties that are under-developed and more particularly where optimum use of the site has not been realized and an examination of the property must be conducted. These appraisals are usually requested by developers or municipalities who may be looking at cash in lieu of parkland, requirements by investors who want to hold on to the property until planning applications can be achieved to realize future uses or for future investors. The needs are plentiful.
There are two common methods used:
Direct Comparison Approach – A look at similar properties listed and/or sold where the value can be converted into an area or unit rate of value when taking into account any differences that may affect the value. The appraiser will describe and classify the property, select appropriate properties for comparison when reconciling value.
Land Residual Approach – A look at the gross revenue potential of the investment and deduction of the cost to realize the value for the property when complete, including but not limited to, direct allowances for profit, absorption, the risk, etc.