Value Land

What Brings Down Property Value According to a Land Broker

Learn from a seasoned land broker about the factors that can negatively impact property value for rural land.

In this expert interview, a seasoned land broker breaks down factors that could negatively impact property value for rural land. Join us as we welcome Jake, a knowledgeable LandProz broker. With his comprehensive understanding of rural land real estate, Jake sheds lights on what you should watch out for, whether you're buying or selling a property.

About Our Guest

Jake is an experienced LandProz broker, who offers comprehensive services for buyers and sellers in central Illinois. As a proud landowner and principal owner of Exodus Outdoor Gear, he combines his marketing expertise with top-quality products and exceptional customer service. Jake also hosts The Land Podcast, bridging the knowledge gap in land ownership and investment. With his experience, integrity, and local expertise, Jake ensures exceptional service in every transaction.

In today's rural land market, are there any trends you've noticed that could negatively impact a property?

1:43: There's a laundry list of things that go into valuing a piece of property. I think something interesting with land is that with houses, you have square footage, finishes, and then the school district or the subdivision it’s in. Land has some parallels with that, but there are a lot of things that are drastically different.

1:59: What we're seeing today is a lot of different things. Windmills first came here 15, 20 years ago, and now we're starting to see solar farms pop up depending on where they're at in coordination with transmission lines. That could potentially negatively impact the property if you're next to it and maybe don’t have the potential to put in some of those high-income earning potential fixtures on a parcel. So, that's this one little thing that could impact a property's value. 

2:31: Another thing is if the land floods. I use Acres to look at the floodplain maps, which is a very quick and easy way to understand if this property is going to get wet. A lot of times you're a slave to the listing before doing due diligence, and that might not be on there. It's important to look and see if the property can get wet because that's going to drastically impact the value, it's going to impact what you can do on the parcel, and it's going to impact row crop production. 

2:58: If it's in a floodplain and you want to build a house or a cabin, you want to insure it. You're going to get flood insurance, which is federally mandated. So, there are so many things that go into it that can really limit the items there of what can be done and the potential value of it. Those are some of the key things to initially think about.

3:16: I mean there's a laundry list of things, but that's a really good basis for looking at the surrounding area and then thinking, what the ideal buyer is going to want to do on it and if it's limited, it's going to impact the value.

What are some of the major red flags concerning property value for rural land that buyers should watch out for and sellers should consider when thinking about putting their land up for sale?

3:45: There's a wide spectrum of different land professionals. There are people who are really focused on it, like me, living and breathing land every single day and really tuned in. And then there are a lot of agents that will maybe take a listing that isn't familiar with land. I think that is sometimes not necessarily a red flag, but you need to have a little bit more due diligence in mind when you're trying to navigate that listing.

4:07: So, I would say some red flags with almost any listing here in the Midwest are if there are big trees on it, they say mature, marketable timber. And the timber market is just as complex. Look through these different things and read those different buzzwords and get an expert in there that can verify those buzzwords are accurate, if that is important to you. 

4:29: So, for instance, trophy hunting—find someone that can tell you “yeah, that neighborhood is excellent for deer hunting” or maybe they'll candidly say “it's okay but I wouldn't say it's excellent.” Getting some experts in your corner can help you navigate these buzzwords that get thrown around. 

4:46: If you're buying it for a buzzword and it doesn't have that, there's gonna be a level of buyer’s remorse. So, I think it's important to read through all those different buzzwords to verify if they're accurate or not. I would say that would be one of the biggest red flags. If I had to pull it down, I would say: make sure you're buying what you think you're buying.

On the subject of factors that could negatively impact a property's value, what are some of the easiest things a landowner can fix or avoid altogether?

5:24: Fortunately or unfortunately, a lot of people lack imagination when they see a raw piece of ground. I was just on a parcel last week that was pretty neglected. It had a lot of good attributes to the farm, but there was some junk, some down stuff, and obviously that's going to impact the property value.

5:41: However, with an excavation company to come in for a couple of days, that place is going to look completely different. A little bit of equipment work can go a long way on a lot of these parcels. You can get rid of some of those old fallen-down buildings that have been neglected for decades.

6:01: You can add a trail system. Let's say it's really hard to navigate and you can't hike around, and you feel like you're bushwhacking all the way around the place. A trail system, cleaning it up, is one of the easiest things to do, and putting up a gate to control access into the parcel is a really easy way to force instant equity.

6:19: Make the property more enjoyable for yourself. Fix the obvious issues that most farms have in some capacity, whether it's erosion issues or all these different things. So, figure out what you can fix, what's the course of action to fix it, and the potential cost. Put that into your equation for purchasing it. Understand the things you can't fix and make sure they're not deal breakers.

How can neighboring land negatively impact value?

6:51: I would draw this parallel back to residential homes. There are good neighborhoods and less savory neighborhoods for a variety of different reasons, and rural land is no different. I think the biggest thing is understanding what you plan on buying that parcel for, and does that neighborhood have similar goals or at least neutral goals to what you do?

7:15: Having a property in a bad neighborhood with problematic neighbors and disputes is going to hinder the ability to resell the parcel. So, let's say you overlook those things, you buy and you think it's not that big of a deal and then you buy, you find out that it is a big deal, and it is a pain.

7:36: Ultimately, anyone buying rural land is for enjoyment in a lot of ways, obviously there's the investment aspect of it. But if you buy something in a bad neighborhood that's taking away the enjoyment factor, then to me, that's really important, and it can certainly impact the value of a neighborhood.

7:49: The other thing too is let's say you're in an area that is where you just want to go there, you want to camp, hike, just enjoy peace and quiet. Let's say that neighborhood is never going to offer peace and quiet. It's going to impact the value. So, it's just looking at it holistically and drawing it similar to when you're looking at a house. Would I want them as neighbors? I don't know. It's the buyer's decision. I have no dog in this fight, but just ask yourself that question. I think it is important.

8:21: Inversely, if you get into a great neighborhood, that’s awesome and people will pay more to be in a good neighborhood. Same thing. People will pay more to be in a good school district. It’s the same ideology that transfers into rural land.

Can you share some experiences where something unexpected brought down the value of a rural land investment?

8:43: Yeah, I remember this. This was two Februarys ago, and I saw a listing come live in kind of my neck of the woods. I thought it was priced really well, and I went and walked it right away. It's in an area that I had sold some property before, and it's a very industrious zone, is the best way to describe it. 

Walking this parcel, I kind of got this eerie feeling that the land has more stories to tell than what I could tell initially. Not to bore anyone with it. But I walked on the top of this hill, there was switchgrass on this whole spine of this ridge system, which is a native grass and often can be used in remediation for different things like EPA. 

9:24: So, I did some additional research, and it was actually an old zinc mine a long time ago. It was in a superfund area. An EPA superfund area is a program that remediates an area, and this area had to remove like six inches of topsoil in this whole neighborhood. We don't know if there was remediation on this piece. That would be an example of: it's still below market, but it directly impacted the value. 

9:54: Because that study published by the EPA said you couldn't eat a turkey that was shot on that parcel, or you shouldn't eat the squirrels. You should limit the amount of venison you eat from the game you kill there. That is where doing a lot of homework and understanding what you're getting into is key. 

10:12: It ended up selling, and I'm sure the people are happy with it for their own goals, but it directly impacted that parcel. I would say it probably sold for 30%, maybe 25% less than what it would have otherwise. So, that's a really unique story. 

10:25: There's not a lot of EPA superfund zones, but to buy a house in that area, the seller has to sign a waiver and the buyer has to sign a waiver that this is an at-risk zone. There are potential health complications by living in this area. It's very spelled out, and obviously that's gonna impact the value.

What are some resources or tools you use to help evaluate a property?

11:01: I use a pile of tools. In this instance, I had to use the EPA site to navigate what that is, and dive into the specific reports of that area. That farm was ground zero. I think it was literally called ground zero. It's like the first mine. 

11:19: So, being resourceful and looking through all these different areas online, you can get a lot from a Google search, but most of the time, I'm going to Acres. I'm pulling up the historical imagery. I'm filtering through the last 10 years cumulatively and getting an idea of the history of that farm in one place and really quick. 

11:37: So, I think that's an excellent starting point. If you have more questions, dive deeper and then find out what else you need to figure out. Maybe you need to make some phone calls to other local experts or—there are just so many resources once you start dialing the phone and talking to different people.

Final Thoughts

In the ever-changing world of rural land transactions, Jake's valuable insights illuminate the intricate factors that can influence property values. Take the time to research properties you're interested in, learn more about its historic use and surrounding parcels, and discuss concerns with a local expert.

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