PROPERTY TYPE

  HOW TO VALUE RESIDENTIAL HOMES ON ACREAGE VS RESIDENTIAL HOMES 

Valuing  homes on acreage requires a different methodology than valuing homes on  standard residential lots due to the complexity of land utility,  infrastructure, and the "law of diminishing returns" for additional land  size.

1. Key Valuation Differences

• Pricing Basis:
  • Normal Lots: Valued as a single unit where the lot is a percentage of the total home value (typically 25% to 33%).
  • Acreage: Valued by combining the house value with a per-acre land value.
• Diminishing Returns: In acreage, the first acre typically holds the highest value because it  supports the home and primary utilities. Each additional acre usually  has a lower per-unit value; for example, five acres will rarely sell for  five times the price of one acre.
• Infrastructure Costs: Residential lots often include "ready-to-use" utilities. For acreage,  you must account for the high costs of private wells, septic systems,  and bringing power lines to the property, which can add tens of  thousands to the value or cost. 

2. Critical Factors for Acreage Valuation

When valuing larger parcels, specific "utility" factors can swing the price more than the home’s square footage:

• Usable vs. Total Acres: Buyers pay a premium for level, buildable, and contiguous land. Steep  slopes, floodplains, or wetlands often carry a significant discount.
• Zoning & Subdivision Potential: If a 10-acre parcel can be subdivided into smaller residential lots,  its value is significantly higher than 10 acres restricted to a single  dwelling by zoning.
• Legal Access: Properties without a paved or legally recorded road maintenance  agreement face lower valuations and stricter lending requirements.
• Improvements: Specialized outbuildings (shops, barns, equestrian facilities) and  fencing add measurable value that is not typically found on standard  lots. 

3. Valuation Methods (2025 Standard)

• Sales Comparison Approach: This remains the primary method. Appraisers select "comps" with similar  acreage. Comparing a home on 5 acres to one on a 0.25-acre lot will  result in an "artificially high" and unsupportable value if simple  upward adjustments are made.
• Excess vs. Surplus Land:
  • Excess Land: Land that can be sold off separately; it is valued at its "highest and best use" as a separate property.
  • Surplus Land: Extra land that cannot be sold separately or used for another purpose;  it adds value but at a much lower rate than the primary lot.
• Cost Approach: For custom or newer acreage homes, appraisers often estimate the  replacement cost of all improvements (house + barn + well) and add the  current market value of the raw land. 

Summary Table

Feature Normal Lot (Suburban)  vs Acreage (Rural/Luxury)

Primary Unit:  Square Feet / Flat Premium Price Per Acre

Land Contribution: 25%–33% of total value Can exceed 50% if sub dividable

Utilities: Public (Sewer/Water)Private (Well/Septic/Propane) 

Key Variable: Neighborhood/School District Land Usability/Zoning