LAND; ITS USES AND VALUES
Land, sometimes referred to as dry land, is the solid surface of Earth that is not permanently covered by water. The vast majority of human activity throughout history has occurred in land areas that support agriculture, habitat and various natural resources. The word ‘land’ is derived from the Middle English word “Lond” which means, earth, soil, ground, defined piece of land, territory, realm, province, district, landed property, country (not town) or ridge in a ploughed field. Land, apart from being a free gift of nature, is used for different purposes, ranging from farming, building of structures, construction of roads, rails, etc. Land use involves the management and modification of natural environment or wilderness into built environment such as settlements and semi-natural habitats such as arable fields, pastures and managed woods. It also has been defined as “the total of arrangements, activities and inputs that people undertake in a certain land cover type. Land use practices vary considerably across the world. The United Nations’ Food and Agriculture Organization Water Development Division explains that Land use concerns the products and/or benefits obtained from use of the land as well as the land management actions (activities) carried out by humans to produce those products and benefits.
As of the early 1990s, about 13% of the Earth was considered arable land, with 26% in pasture, 32% forests and woodland and 1.5% urban areas. Land change modeling can be used to predict and assess future shifts in land use. According to Albert Guttenberg (1959), Land use is a key term in the language of city planning. Commonly, political jurisdictions will undertake land-use planning and regulate the use of land in an attempt to avoid land-use conflicts. Land use plans are implemented through land division and use ordinances and regulations, such as zoning regulations. Management consulting firms and non-governmental organizations will frequently seek to influence these regulations before they are codified. On the other hand, land value is the measure of how much a plot of land is worth, not counting any buildings but including improvements such as better drainage. When a landowner pays taxes on his or her real estate, part of what is taxed is the value of the land, in addition to whatever structures sit atop it. Land which is seen by many as a natural gift of nature is very crucial to real estate, as it forms the basic and bases of all landed properties.
It is a fact that cannot be disputed that, buying land is one way to invest in real estate for profit or secure a piece of property where you can eventually build a home. But land is different from other types of real estate, making it more difficult to assess and evaluate for tax purposes. However, the value of land depends on several factors. The grade of a piece of land, which refers to its topography and level above or below, the level of the nearest road, goes a long way toward determining its value. Land with a very high grade will need to have much of the dirt and rock removed before anyone can build on it. This added cost detracts from value, just as a good grade adds to the value of a piece of land. Also, natural features on a piece of land can serve as a basis for a higher or lower value, depending on the type of feature and the planned use for the land. Items like ponds or streams may add to the natural beauty but can be a source of a lower assessment if they would make it difficult to secure building permits for the site. The same is true for rock, which might need to be removed before construction can begin and plants, which may be a benefit or a drawback if they are too plenty. Finally, a plot of land’s location will always affect its value. Attractive regions with a high rate of economic growth and an influx of population will see land values raise steadily, while the opposite is true for depressed areas. Access via major roads and changes in the surrounding landscape can also play a part in changing the value of a piece of land over time. The fair market value of a piece of land changes with upward and downward trends in the real estate market even as the tax basis remains the same. Real estate companies perform comparative market analyses (CMAs) to place value on real estate including land, based on what similar pieces of property are selling for in the current market. Determining the tax basis of land is essential for anyone who plans to take an income tax deduction for depreciation of property. However, IRS policy dictates that no taxpayer can claim depreciation for land because land does not lose value over time, as homes and other types of property do. This means that the tax basis of a piece of land is the original assessed value at the time of purchase. Taxpayers can determine this amount by subtracting the assessed value of a home from the assessed value of the property as a whole.
The fair market value of real estate is the estimated price to which a knowledgeable, interested buyer and seller would agree. This is only an estimate. The actual price for which a piece of farmland or an undeveloped plot of land sells may be higher or lower than the fair market value. To determine the fair market value, an appraiser or property assessor may use the comparable-property approach. He or she may look for similar pieces of land that have been sold recently and use those prices as a measure of what the piece of land being appraised would go for. Some sales do not represent fair value. If the owner was in a rush to sell to raise money or if the buyer and seller agreed to an extra compensation besides the sale price, the sale price would be skewed from the true market value. Appraisers can also use the income approach to measuring land value, according to the IRS. These bases the value on how much income a property-farmland, for instance, generates for the owner. A third choice, “cost value,” looks for comparable plots that are on the market.