Homeowners who have larger lots than other lots in their area want to know if the value of their home would be substantially more. If a specific lot is approximately 3,000 to 5,000 square feet larger than other lots, it should have an appraised value that is greater. The more important questions is by how much?
Researching other homes with larger lots and then comparing them to homes with smaller sized lots, will give you a pretty good idea of what the market is agreeable to pay. In some cases there is a significant difference in price depending on the size of the lot, other cases the difference may not be very much at all. So, here are some important points that should be taken into consideration:
The Location of Your Space:
If the extra square footage is located in the front of your home, chances are it’s not going to be very valuable. Most buyers prefer more square footage in the backyard vs a street view.
The Actual Percentage Impact Can Dictate Price:
There are some areas or neighborhoods that an extra 5,000 square feet would make absolutely no difference whatsoever. If the average residence is sitting on 3 acres, 5,000 square feet is a mere 4% which is not going to be significant to potential buyers.
Location – Location:
It’s no secret that almost all aspects of real estate value are tied to location – people will always be willing to pay more for property that is in desirable areas. This is as true for “micro” location as it is for “macro”. If your extra large lot is sitting on a very busy street, most buyers are going to have an adverse reaction to the size. Many buyers will actually pay less for that kind of condition. On the other hand, if you are on a small, very quite street or out in the country a buyer is more likely to offer more for that added space.
New Construction Premiums:
Most builders will charge a great deal more for larger lots, but in the long run, the resale market might not want to pay that same premium. If you paid $100,000 for a substantial lot, you think the future buyer would be willing to pay the same. Unfortunately, that’s not the case and the market may not be willing to do so a few years down the road.
Is The Space Useful:
The Advantage or convenience of the lot may also dictate its value. If that added lot space is not usable due to zoning, easements, vernal pools or other issues, the lot is not going to hold much value.
Double The Value:
Some homeowners believe that their lot should be worth more in value when the size increases. Unfortunately, that’s just not true. If you purchase an extra-large dress, would you be willing to pay twice as much as a smaller dress? Of course not. If one acre sells for $100,000 wouldn’t 4 acres sell for $400,000? Additional acres will actually have a lower value than the initial acre. It’s called diminishing returns.
There a many variables in extra lot sizes or extra acres. Location, convenience and what the true value might be years from now. Keep in mind, picking up more square footage in hopes of increasing your home value, might not have the financial show you were hoping for.