This can be especially important if you have a home office and want to depreciate that portion of your home for tax purposes. You must know how much the home is worth and how much the land is worth because while you can depreciate the physical structure, you can't depreciate the land it sits on.


Look for Land Sales that are Comparable 

Another way to determine the value of your land is to look at empty land that is very similar to your land and see how much it sells for per acre. When you look at several different comparable land scales, you can create an average cost per acre in your area for land that is similar to yours. This will give you an approximate value of your land if it were to be sold as an empty lot today. You can then subtract that amount from the value of your home and land together to determine how much your home structure is worth.

Understand Value Ratios 

You can also use some basic calculations to determine an approximate worth of your home compared to the land it sits on. The most common calculation involves using the total cost you paid for your home, including transfer taxes, recording fees, utility connection fees and title insurance. Then, the assessed value of the house is divided by the total assessed value of the house and land. This results in the percentage of your total cost that your home makes up. The remaining percentage is the percent of the total that your land makes up. Because this process can be complex and inexact, it is important to make sure that your calculations are correct by comparing them to comparable land sales and any appraisals available.

Find An Appraiser

 The easiest way to determine the value of your land compared to the value of your home is to hire a professional appraiser. An appraiser is a professional who has background knowledge and experience to determine the value of your property based on where it is located and the current market. An appraiser can give you an independent, official determination of the approximate worth of your property and home. You will, however, have to pay out of pocket, and a reputable appraiser can be costly.


With all of the “deals” we are hearing about these days, I guess it’s not surprising that people are finding homes with large tracts of land associated with them.  In general, the ratio of “land value” versus “home value” needs to be less than 30%.  This goes for FHA loans, VA loans – Conventional loans, USDA Loans… underwriters are going to look at the appraisal, and if the land is worth more than 1/3 of the total sales price, it won’t work for our Bank.

The Bank takes the position that if the total Sales price is $100,000 and the value of the 2 bedroom, 2 bath house on that property is less than $70,000 – they are essentially making a land loan, not a “home” loan (which is what we do).

Sometimes you can find out from a Real Estate Agent what the Land is valued at and quickly do the calculations on your own.


Recently, USDA came out with a ruling that states the following:

The amount of land associated with the residential purchase is limited by 7 CFR 1980.313(d) which indicates”Generally, the value of the site must not exceed 30 percent of the total value of  the property.”  If the site exceeds 30 percent of the total value of the property, two additional tests must be met to ensure the property is eligible:  1) the value of the site must be typical for the area, as evidenced by the appraisal; 2) the parcel cannot be subdivided into two or more sites.  The additional tests are applicable when the site value exceeds 30 percent of the total value of  the property.  The regulation does not support imposing limitations on the area of land associated with the dwelling purchase.  State Offices cannot impose arbitrary acreage limitations, such as 2 acres, 10 acres, 15 acres, etc.

If you have your heart set on a small house sitting on 20 acres of land, this might seem promising – but don’t be fooled!  The value of the site MUST BE TYPICAL for the area.  We don’t have many “neighborhoods” in NC where all of the recent sales (in the last 6 months) were small houses on LARGE expensive lots. Further, USDA says that the Parcel cannot be subdivided into 2 or more sites – to get around one tract that has too much land associated with it.

USDA is a great program, and it’s probably the BEST program for a home that is NOT an income producing home.


USDA Loans—Land Value vs. Home Value is available in the following areas/cities

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