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| The Valuation of Undeveloped Land: A
Reconciliation of Methods Author: Karl L. Guntermann Start Page: 169 Abstract: The valuation of
undeveloped or "subdivision" land typically is accomplished by using either a
single discount rate applied to total projected cash flows or by using a land discount
rate applied to cash flows that are net of a developer's profit. The relationship between
these two techniques is more complex than is generally recognized and valuation errors
easily could result from the way they are typically used by appraisers. This paper
reconciles these two techniques and demonstrates the conditions necessary for each to
produce a correct estimate of land value. Survey data are used to illustrate the
application of each technique and the incorrect value estimate that could result from
their misapplication even if appropriate market data are being used. |
