What the Buyer Knows™
A landowner hears $30,000 an acre and it sounds like a big number. The buyer across the table may be thinking in square feet, and in what the land turns into once it's built on. Those two ways of counting can hide a lot of money.
The conversion
An acre is 43,560 square feet. That one number does all the work:
- $30,000 an acre is about 69 cents a square foot.
- $1 a square foot is $43,560 an acre.
- $8 a square foot is $348,480 an acre.
Farm and ranch land is usually priced by the acre. Retail pad sites, commercial frontage and industrial lots are usually priced by the square foot. When a tract could be either one, the buyer knows which number they're working with. You should too.
Gross acres and net acres
Not every acre on your deed can be built on or sold as a lot. Floodplain, road right-of-way, drainage and detention, pipeline and power line easements, and the streets inside a new subdivision all come out. A buyer pricing your land for development is pricing the usable acres, then spreading that number back over the whole tract.
So two offers at the same price per acre can be very different offers. One may assume most of your land is usable. The other may assume a third of it isn't.
How a developer backs into a land price
A developer starts at the end. What will a finished lot, house or building sell for? Then they subtract what it costs to get there: roads, water, sewer, drainage, fees, financing, time and their own profit. What's left is what the raw land can carry.
That's why the per-acre price on your land can land far above or far below the farm next door. The answer depends mostly on utilities, access and what the city or county will approve. See why two tracts side by side can sell for very different prices.
Questions to ask before you answer an offer
- Is the price per gross acre or per net acre?
- Who confirms the acreage, and does the price change if the survey comes in different?
- Is part of the tract road frontage that a buyer might value by the square foot?
- What does the buyer need to make the numbers work (sewer, zoning, a plat) and who pays for it?
The point
A buyer who runs these numbers carefully is doing their job. The problem is when only one side of the table has run them.
Don't sell your land until you know what the buyer knows. If you own land in East Williamson or Milam County and you're weighing an offer, request a Legacy Land Value Review™. It's free, and you'll know what you own before you decide anything. Or call me at 512-269-5278.
From Dirt to Dollars.
Brad Robbins, Broker/Owner, Top Notch Properties
Any statement of value is a broker's opinion of value, not an appraisal. Source: one U.S. acre equals 43,560 square feet (NIST Handbook 44, Appendix C). Photo: Top Notch Properties. Top Notch Properties · Brad Robbins, Broker · TREC License #610974 · 512-269-5278.