Methods for assessing the market value of land plots

If a plot of land is sold, the owner will have to contact specialists to evaluate it.

As a result of this procedure, the market value of the land plot will be established. It is needed so that the seller clearly understands exactly how much his land is worth, and also to eliminate sudden jumps in the real estate market.

An expert assessment of a land plot is also a guarantee for the buyer; he purchases the plot at a real price, without overpaying for amenities.

Land valuation: definition and legislation

During the market assessment of a plot of land, its market value is determined; it is established at the time of the examination. The specialist performing the procedure relies on the standards prescribed in Federal Law 135 of 1998 .

There are a number of standards that must also be taken into account when conducting the assessment procedure. They were approved by orders of the Ministry of Economic Development.

In addition, the requirements of regulatory documents must be taken into account depending on the purposes of the examination. If the assessment procedure is carried out for mortgage lending, these are some regulatory documents; in the case of concluding a purchase and sale agreement, these are different.

Purpose, types of permitted use and size of the compressor station

For each site, depending on the type of use, a specific indicator of one square meter of an object is determined, which is considered a unit of measurement for determining the KS.

This data is included in the concept of cadastral valuation or revaluation and is included in the passport along with the total cadastral value of the site.

In cases where an object is assigned several types of permitted use, the one whose specific indicator is greater is selected to determine the KS.

It is very important for the owner of the site to monitor the property's CC. Everyone is interested in the real price: owners, tenants and users of real estate, since changes entail an increase in land tax rates.

There are several main factors that influence the CS of land and must appear in the report on the assessment of the cadastral value of a land plot:

object area;
type of permitted use;
the size of the specific indicator.

Data about the property specified during the calculation correctly and without errors will ensure that owners and tenants correctly calculate tax payments.

Legal basis for land valuation

In what cases is an assessment of the market value of a land plot required? Market valuation of land is required for various types of transactions:

for registration of inheritance, which is this land plot;
to draw up a purchase and sale agreement; in case of division of property, for example, upon divorce of spouses;
to determine the value of the shares of a plot in the event of one owner buying out the shares of another;
during the donation procedure, etc.

A notary may insist on the valuation of the land, for example, when drawing up a marriage contract. All these are the legal basis for land valuation.

The assessment procedure is mandatory if the owner plans to carry out the following transactions with the site:

The cost of the plot is determined before the privatization procedure, and it does not matter who owns this plot - the municipality or the state. The procedure will also be required in the case of transfer of land for lease or trust management.
In the event that a land plot owned by a municipality or state property is planned to be used as a collateral.
In the event of a land alienation procedure.
When carrying out the procedure for the assignment of debt obligations associated with plots located in municipal, regional or state ownership.
In case of transfer of a state, regional or municipal land plot as a contribution to the authorized capital, funds of legal entities.
An assessment is required in all situations where it is necessary to understand the exact market value of a given land plot, for example, during nationalization of property, during mortgage lending, when drawing up a marriage contract, division of property in case of divorce, when one owner buys a share from another owner, at the time of land seizure for state or municipal needs.
When monitoring the correctness of tax assessment on a given land plot.

Measures to evaluate a land plot can only be carried out if there is an agreement for this type of service. This document must be signed by both the customer and the contractor.

Step-by-step instruction

Determination of cadastral value

The market valuation of land in the region is established as a result of cadastral work. Their implementation is initiated by the Federal or municipal authorities. Who determines and sets the cost in the region?

After the land audit, the regional executive committee, represented by the regional governor, studies and analyzes the situation with the land resource, and then establishes the average cadastral value in the region.

Based on the established base (average) cost , a differentiated calculation is made, which determines the remaining price options in accordance with zoning. Each established zone has its own definitions, which are defined:

purpose of the memory;
permitted use;
the presence of encumbrances.

In addition, the proximity (remoteness) of the memory plays a significant role:

from infrastructure;
from communication networks;
from transport links.

The above indicators play the role of a coefficient that determines the increase or decrease in the average statistical value of land in the region and assigns valuation information to cadastral quarters.

Depending on the intended purpose of the land , various indicators will influence the determination of the cost.

For example, for lands provided for private household plots, soil fertility indicators will play the most significant role, and for land plots provided for individual housing construction, the development of infrastructure, proximity to the center and the status of the settlement will have an impact. Read more about the application for revision of the cadastral value of a land plot here.

Required documents

In order to calculate the cadastral value of land plots, you will need the following documents:

Technical documents of the land plot, in particular land surveying, where the total area of the site and the intended purpose of the land are indicated.
Cadastral passport, which indicates the specific indicator of the cadastral value of the land plot.
Boundary project indicating development zones in the specified cadastral quarter.
An urban plan that specifies the infrastructure details of the cadastral quarter.
Technical documents for a property built in the land plot zone.

Based on these documents, you can make calculations that will provide information about what type of permitted use, according to a strict definition, the site entrusted to you belongs to. Here, seemingly insignificant differences can be identified, which essentially categorically change the cadastral value of the site.

Naturally, the listed documents are expensive, take a long time to prepare , and obtaining some of them requires special permission from the administration. Therefore, it will be enough for you to receive statements indicating the necessary data.

To obtain an extract, you will need a civil passport and a valid identification document.

Terms for issuing a certificate of the value of a land plot, which will be issued in the form of an extract: from 5 working days to 21 working days.

Calculation formula

To find out in practice how the cadastral value of a land plot is determined, you can use the methodology for calculating the cadastral value of a land plot, which is presented on the official website of Rosreestr at the email address: https://www.rosreestr.ru/.

The methodology used by professional appraisers is universal . Having identified the specific indicator of the cadastral value in the cadastral quarter, they define it as the base unit. Next, they identify the product of the base unit and their number, which is the volume of a separate plot (the area of the property).

In cadastral blocks, the basic values coincide according to the principle of similarity and are determined in accordance with methods that take into account all the characteristics of the surrounding lands.

At the same time , in order to calculate, certain formulas are used . They are quite complex and their professional use is available to cadastral engineers. You can use these formulas, but it is not advisable to position the calculation results as an alternative to the value established as a result of state bonds.

The cadastral value of land plots is calculated from the average unit value for the region.

To calculate the average statistical value, a basic formula is used, according to which its result is defined as the average value (quotient) of the total value of land in the region and the total area of regional massifs.

Thus, we can obtain a basic (test) specific indicator for the entire land mass of the region. From this indicator, subsequent calculations are made using numerous formulas. Each formula adds coefficients to the basic specific indicator depending on the advantages present in the array zone or in the cadastral quarter.

If there are no advantages or the territorial zone is one of the problem areas, the coefficients are subtracted from the base cost.

Reasons required!

The grounds for carrying out GKO ZU are determined by the need for an audit of certain areas of land or an established plan. The assessment is carried out on the basis of a special Order, which has the status of a nomenclature document.

It can be compiled by both the Federal and municipal authorities. The order includes data from GKN sources on lands in respect of which there is a need for an assessment.

In addition, the assessment does not allow third parties to participate in the process . The order appointing a land audit also determines the members of the audit commission who will carry out the corresponding procedure.

These include competent and experienced specialists who verify and analyze the conditions for the maintenance and development of land resources in the regions, and also consider the possibility of increasing the cadastral value of land in certain development zones of the region.

Procedure and process for holding state bonds

It is as follows:

Based on the Order issued by the government of the Russian Federation or a municipality, a list of performers of works under the State Defense Committee is compiled, as well as a list of land areas to be assessed.
GKN specialists prepare information about the tracts selected for audit and classify information about them by cadastral quarters.
A separate order attracts an appraisal organization that participates in the competition announced to receive the State Defense Order.
She analyzes the situation in accordance with the information provided from the State Property Committee and, using regulated methods and regulatory formulas, makes calculations and recalculations of land values.
The obtained data and assessment results are documented in a corresponding report.

Results and reports

Approved by the regional governor. Within 10 working days , they must be transferred to the State Property Committee, where, within 6 months after their approval by the regional executive committee, they are entered into the regional cadastre records.

All information received must be published in the local press and presented on the official website of Rosreestr. Citizens must be properly informed of the results obtained, since they have the right to make changes and amendments for six months, until the records are fully regulated in the new price context.

Relevance of the assessment

In the report on the assessment procedure carried out on a land plot, the date on which this document was drawn up is mandatory. This is primarily due to the fact that market prices do not stand still and are constantly changing.

After just six months, the report may lose its relevance due to a sharp jump in the market . The amount may also change as a result of changes that occurred with the plot itself - for example, a flood occurred, as a result of which the price of the land fell significantly. Or, on the contrary, the owner made improvements - installed water, built a house.

Components of the CS of a land plot

Land assessment is carried out according to According to these rules, the KS of lands is determined, first of all, by their intended purpose and functional use. There is no uniform calculation method.

According to federal assessment standards and a list of the main parameters for determining the KS of land plots, within a month from the date of their approval, they are subject to publication in an official source.

How the cadastral value of land is calculated is a rather complex process, so it must be carried out by expert organizations.

The assessment of the KS of lands intended for gardening, market gardening, summer cottages, urban and rural settlements should be carried out according to statistics of market prices for these objects. Agricultural and forest areas are valued at capitalized rental income.

The calculation formula presented below is considered simplified and allows you to obtain an approximate value of the KS:

Plot area x infrastructure coefficient + specificity coefficient x transition coefficient = cadastral value

All coefficients used here are calculated by specialists who evaluate objects.

Market and cadastral value of the land plot

Market value is the price of this particular plot in the conditions of the real estate market at this particular moment . To determine the exact cost of a plot, a special examination is required, but the seller can independently set the price for his land at his own discretion.

Provided that the seller is in a hurry and needs to urgently sell this plot of land, he can set prices below market value.

If he has such parameters as time and patience, prices can be set slightly higher than the market average. But at the same time, the seller must have the gift of persuasion in order to be able to sell his plot at the stated price.

In addition to the market value, a cadastral valuation is carried out for each land plot . As a rule, the latter is 25% higher than the market price.

The procedure for conducting cadastral valuation is determined by the Government of our state. In turn, local authorities can establish the average level of cadastral value of land for a given specific locality.

The cadastral value of land is the starting point for determining the amount of land tax that the landowner is required to pay annually. Also, using the cadastral price, the rental amount for this land is determined.

Taking into account the same cadastral price, the price for purchasing this plot for private use is set.

The cadastral value directly depends on the intended purpose of the land plot. Land intended for housing construction has the same value; if it is industrial land, their cadastral valuation will be different.

Unlike the assessment of the market value of a land plot, its cadastral price does not depend on the degree of improvement of this particular plot. This is an average indicator based on the average characteristics of a land plot for a specific purpose.

The market price is required when buying and selling a land plot on the secondary market, when market relations are assumed between the current owner and the future.

If this land plot is in municipal, regional or state ownership and a private person wants to purchase it, the cost of the plot is determined in accordance with the cadastral value of the land.

Normative base

The conditions and regulations for conducting a cadastral valuation are regulated by the provisions of the Land Code of the Russian Federation and the following federal laws :

“On state cadastral valuation” dated 07/03/2016 N 237-FZ
“On cadastral activities” dated July 24, 2007 N 221-FZ
“On state registration of real estate” dated July 13, 2015 N 218-FZ
“On valuation activities in the Russian Federation” dated July 29, 1998 N 135-FZ

When assessing, you must rely on the following orders of the Ministry of Economic Development of the Russian Federation :

Order of the Ministry of Economic Development of the Russian Federation dated 02/15/2007 N 39 (as amended on 01/11/2011) “On approval of the Methodological Guidelines for the State Cadastral Valuation of Land in Settlements”
Order of the Ministry of Economic Development of the Russian Federation dated August 12, 2006 N 222 (as amended on November 17, 2011) “On approval of the Guidelines for determining the cadastral value of newly formed land plots and existing land plots in cases of changing the category of land, the type of permitted use or clarifying the area of the land plot”
Order of the Ministry of Economic Development of Russia dated 06/07/2016 N 358 (as amended on 05/12/2017) “On approval of methodological instructions on state cadastral valuation”
Order of the Ministry of Economic Development of Russia dated December 8, 2015 N 921 (as amended on November 23, 2016) “On approval of the form and composition of land survey plan information, requirements for its preparation”
Order of the Ministry of Economic Development of the Russian Federation dated September 20, 2010 N 445 “On approval of the Guidelines for the state cadastral valuation of agricultural land”

Decrees of the Government of the Russian Federation applied during the assessment:

Decree of the Government of the Russian Federation dated 04/08/2000 N 316 (as amended on 06/30/2010) “On approval of the Rules for conducting state cadastral valuation of land”
Decree of the Government of the Russian Federation of August 25, 1999 N 945 “On the state cadastral valuation of land”

It is necessary to adhere to the legally approved Federal assessment standards :

“General concepts of assessment, approaches and requirements for assessment (FSO N 1)”
“Purpose of valuation and types of value (FSO N 2)”
“Requirements for an assessment report (FSO N 3)”
“Determination of cadastral value (FSO N 4)”

What affects the market value of a land plot?

Land plots of the same size and with the same characteristics. but at the same time, located in different areas of the city, they will cost differently.

What does the price of land depend on and what factors influence this indicator:

Socio-demographic feature – population structure, its density, composition.
General economic situation - the economic situation in the country, region, given specific locality, debt burden of the population, income level.
Legal regulation and current taxation systems - legal norms of private and public law, these may be environmental regimes, legal requirements for the payment of taxes.
Natural conditions and environment - climate, hydrological conditions, ecological component of this particular area.
Physical and qualitative characteristics of a land plot - size, shape of a given land plot, topography, position in relation to neighbors, soil quality, presence of buildings, their characteristics.
Location of the land plot - accessibility of the plot, availability of access roads, infrastructure, proximity to industrial facilities, presence of a beautiful landscape.

Who has the right to conduct an assessment?

How to estimate the value of a land plot, and who has the right to carry out this procedure?

In order to evaluate the site, you need to contact a specialized company, it can also be a real estate agency. You can also contact a private appraiser, but before you sign a cooperation agreement with him, it would be a good idea to make sure that this specialist has all the necessary licenses.

Even if you contact a large company, do not be lazy to collect reviews about it . Contact only an organization that has a proven track record of quality work.

In the event that the assessment made causes distrust, there is always the opportunity to order an independent assessment of the land plot.

6.3. Ground rent capitalization method

6.3.1.

The essence of the method (according to [31] it is used to evaluate built-up and undeveloped plots): the value of a land plot is determined as the difference in discounted income and expenses associated with the most efficient use of the land plot.

C zu = ∑ j = 1 n DX j − PX j ( 1 + i ) tj {\displaystyle {\text{C}}_{zu}=\sum _{j=1}^{n}{\frac { DX_{j}-PX_{j}}{(1+i)^{t_{j}}}}}

where: C zu {\displaystyle {\text{C}}_{zu}} is the cost of the land plot, den. units; DX j {\displaystyle {\text{DX}}_{j}} -j-th income from the use of land, den. units; PX j {\displaystyle PX_{j}} -j-th expense from the use of land, den. units; tj {\displaystyle t_{j}} - time interval, period; i {\displaystyle i} - discount rate, fractions of units/period.

6.3.2.

What to pay attention to in practical activities:

6.3.2.1. The use of the land plot should be carried out according to its most effective use.

6.3.2.2. The costs of using a land plot include costs associated with: preparing the site for use (including demolition of existing improvements for subsequent development);

construction of improvements; operation and subsequent sale of improvements / land.

Methods for assessing the market value of land

In theory, there are several valuation methods that allow you to determine the amount of a given plot. A feature of the assessment of a land plot is the fact that the land in each case is considered as a potentially empty area, free from development.

Methodological recommendations for land valuation are prescribed in the order of the Ministry of Property of Russia dated March 6, 2002; this document has not lost its relevance for 2021:

Sales comparison method . The simplest, and therefore the most common. The appraiser selects similar offers on the market and compares the presented plots according to a number of parameters. Based on these comparisons, the cost of this particular plot is determined. It is necessary to take into account that the prices indicated in the advertisements are the desired amount. It is not known at what actual price this or that plot was sold. But for the sake of fairness, it makes sense to make a discount of 8-12% from the price stated in the advertisement. This method is only suitable for a developed market.
Distribution method . Used for lands on which there are buildings. To carry out an assessment in this case, it is necessary to understand how much each property and land costs separately; in this case, a comparative approach is also used. As a result, the cost of this land together with the buildings standing on it is calculated through a reasonable generalization.
Selection method . Applies to a land plot with buildings, but only if there is information about the prices of transactions with similar objects. This method is used for those areas that do not require large investments to improve them. Most often used for summer cottages where it is easy to calculate the amount of expected investments.
Method of capitalization of ground rent . Knowing the rental rates for this plot, we can assume that this amount will become the monthly income from this land. From this estimated regular income the cost of the plot is determined. This price is correlated with the market value of the land, from which we can draw a conclusion about the recoupment.
Remainder method for land . It is used for both built-up and empty land plots. A procedure is carried out to calculate the improvement of these lands, the net income from the rental of this land for a certain period, the calculation of the funds required to improve the site and other parameters.
Intended Use Method . It is used for a plot that can be divided into smaller plots. You will have to determine the approximate cost of each plot, calculate the costs and schedule for the development of the sales period, and subtract the costs incurred.

Methodology

For cadastral valuation of land plots, experts use a variety of techniques that are based on three main approaches to valuation: cost-based, comparative and profitable.

Cost-effective approach

It is used when evaluating unique properties that cannot be compared with other real estate due to the lack of such, or this land plot is not in consumer demand.
The cost of the site is determined.

Construction specifics, wear and tear, and the price of the site for the most effective method of use are taken into account.

Comparative

It consists of assessing standard objects that have many analogues for comparison; a lot of information is available about the market value of such objects.

Despite its simplicity and high correctness, this approach takes into account only the current state of the market; this state changes over time.

Methods are based on this approach:

Sales comparisons to evaluate developed or undeveloped sites, taking into account sale prices and offers of similar sites.
Allocations for the assessment of built-up areas, which combine the comparison method and elements of the cost approach. Information on prices for transactions with single similar objects and the possibility of the most effective use, taking into account the improvements made, are taken into account.
Allocations for built-up areas. Information is collected on prices for single objects similar to this one, taking into account the share of the site in the market value of the single object and the possibility of effective use according to the improvements carried out.
Intended use, to determine whether the site can be used to generate income.
Capitalization of rent, considers the possibility of obtaining income from a developed or undeveloped plot, taking into account the capitalization rate and market value.
The remainder is being considered for improvement by developing the site to generate income.

Profitable

Preferred when planning income from commercial operation , defined as expected income. The amount is determined based on a study of previously received income.

The basics of financial mathematics, capitalization and discounting are used:

taking into account the risks of investing capital;
with the ability to forecast cash flows;
analyze information from a given market segment;
anticipate possible changes in the value of an object under the influence of external factors.

This is the most reliable and information-rich method for business objects.

Self-assessment

Not in every case the seller is required to carry out a formal valuation procedure for his land plot. Therefore, if necessary, the seller can carry out this procedure on his own. How to evaluate a plot of land yourself?

You need to take several sources of private advertisements, take the most popular ones, they are more trustworthy, which means there is always a large number of current offers available. Make a selection of similar proposals; to get a more objective picture, you will need 15-20 proposals.

The best option is if these are plots located in the same area as you. But you need to understand that there are no two identical plots of land, similar to each other like twins, this adds difficulties.

To carry out the analysis, select several criteria by which you want to evaluate the site: the presence of water, buildings, their condition, landscaping, etc. Rate each criterion on a five-point scale. Finally, add up the points and compare them with the prices presented.

If there is no price in the text, call and ask. But keep in mind that the announced price is what the seller is counting on; in fact, it will probably be lower, so immediately “discount” 8-12% of the average price received for similar plots.

An example of self-calculation of land value

Any owner of a land plot is always interested in calculating the values on which the costs of maintaining the plot will depend.

According to recommendations for conducting settlement procedures, expert organizations use various methods.

The most common option for calculating the cadastral value of a land plot yourself is as follows:

The land tax rate established for the region, x 200 / per area of the object for which a KS calculation is required

Land tax rates for each category of plots are established by local governments. Taxpayers can review this information in the approved legal act before calculating the cadastral value of a land plot.

The result obtained using this formula can conditionally be considered correct. However, practice shows that in independent calculations errors are often made that affect subsequent amounts, so there is a risk that in the end the tax amount will be incorrect.

How much does a land appraisal cost?

The cost of compiling this report depends on a number of parameters:

The degree of distance from the site is the time that the appraiser will spend on the road. And time, as you know, is money.
The experience of this specialist, the more experienced the appraiser, the more you will have to pay for his work. But this is a justified expense, since an inexperienced specialist may make an error in the calculations, which may lead to disagreement with the second party’s report. As a result, a repeat assessment procedure may be required, and this is an unforeseen expense.
The remoteness of the territory from the regional center - in large cities, due to competition, appraisers are ready to make discounts, and sometimes significant ones. In smaller cities, specialists try to keep a single price to avoid loss of income.
The size of the land plot and the presence of buildings on it.

So, how much does an appraisal cost? The cost of conducting an assessment in regional capitals can cost 2-50 thousand rubles.

Yes, sometimes the prices are steep. At the same time, you need to understand that a private farmstead measuring several tens of acres will cost a minimum cost, but the assessment of industrial land measuring several hundred hectares will cost the same 50,000 rubles.

Therefore, do not rush to sign an agreement with the first agency, take your time and monitor the organization. Pay money only in that case. If you're sure it's worth it.