Most people would assume that the larger their lot, the more it’s worth. Surprisingly, that’s not always true.
In fact, it may not even increase the value at all.
To explain this clearer, let’s say you have a beautiful home on a 1-acre lot in Maryland with a water-front view. Your house, backyard, garage, garden, and basically everything you need to live comfortably sits on half an acre of that land.
So now you’ve got this extra half-acre of land to the left of your house that’s just sitting there. It takes some maintenance to keep this extra land, and an even longer time to mow the yard. Suddenly, your family has an idea:
“Why don’t we sell just a portion of our property to someone else? We don’t really need it anyway.”
It’s a great idea. You call up a real estate appraiser to come and check out your property, only to get some bad news. Apparently, Maryland requires a lot to have an area of at least 3/4 acres. And you only have 1/2 an acre to spare.
We real estate appraisers call this surplus land. Here’s the definition from the Real Estate Appraisal Dictionary (Fifth Edition):
“Land that is not currently needed to support the existing improvement but cannot be separated from the property and sold off. Surplus land does not have an independent highest and best use and may or may not contribute value to the improved parcel.”
Since you’re a 1/4 of an acre short, zoning doesn’t allow you to split your land into multiple lots.
You’re stuck with this extra land, and will indeed spend a lot of extra time mowing your huge lawn.
But lets say, hypothetically, that the state of Maryland only required a lot to have an area of 1/2 an acre. Now you have what we call excess land. Here’s the definition:
“Land that is not needed to serve or support the existing improvement. The highest and best use of the excess land may or may not be the same as the highest and best use of the improved parcel. Excess land may have the potential to be sold separately and is valued separately.”
If this were the case, then you and your family can sell a part of your lot, because zoning would allow you to sub-divide your land.
Take a look at this picture. In the subject’s lot, we can see the house and driveway clearly in the bottom of the picture- we can also see the huge chunk of extra land above it. Since there are no zoning conflicts, whoever owns this lot would be able to sell all of the excess area land, and still own the subject’s site.
If a property has excess land, a real estate appraiser is required to describe it in the appraisal, but not assess it’s value independent from the subject property. Ultimately, the only real difference is that excess land has the potential to be subdivided and sold, while surplus land does not. Obviously this makes excess land more valuable, but every property is different. Have you ever dealt with a property with lots of additional land? Let us know below, along with any questions or comments you may have.
Jonathan Montgomery Founder and President of the The Real Estate Appraisal Group. He has been a real estate professional since 1998. He’s been a broker, an investor and as an appraiser. He enjoys working as an appraiser, doing real estate appraisals in Washington D.C., Southern Maryland, and Northern Virginia.