If you are a commercial appraiser in Nevada you have already been faced with the fact that there are very few land sales that have been transacted in 2008 and 2009.  A recent report by the Bently Group (www.thebentlygroup.com) indicated that "the vacant land market continued to report a slowdown in sales volumes and reduced pricing."  Based on their report there were only 77 vacant land transactions during the 1st Quarter of 2009.

What is important to appraisers in the Bently Group report is the stated fact that "the majority of land transfers were comprised of foreclosures or deeds in lieu of foreclosure."  These transfers are not acceptable for use as comparable sales since they are forced transfers, not made by willing buyers and willing sellers under normal market conditions, and thus they cannot be used as a basis for valuing another property. 

This same situation is beginning to play out in other markets as fewer office, industrial and retails transfers are being made as properties reverts to banks and underlying lien holders.  There are few buyers who can secure funds to purchase land or commercial properties and with increasing unemployment and business belt tightening, demand has been significantly reduced.

Appraisers faced with fewer land sales as a basis for their value opinion are looking at historical sales.  Data indicates that in some of the Las Vegas sub-markets land prices have been reduced to 2004 levels.  Armed with this information some appraisers are completing land sales research in 2004 and using sales from that period as comparables in the current market.

It is my opinion that there are a number of potential problems associated with using this methodology.  One of the most important is the fact that land sales prices in metropolitan Las Vegas, Nevada during 2004 were moving explosively upward.  The range in sales prices during that year was considerable.  Some properties purchased in early 2004 were resold for nearly double the acquisition sales price by the end of that year.  So the selection of "comparable sales" in 2004, in what was clearly a disimilar market to that we are experiencing in 2009, can lead analysts to disimilar results.

The Las Vegas land market in 2009 has reached an effective bottom.  The only sales that are being made are those transacted by parties who are for one reason or another compelled to sell.  Most highly collateralized properties have already been taken back by financial institutions or prior owners, few sales are being made with the large discounts necessary to induce buyers to act.  Thus, finding 2009 vacant land sales will remain a challenge for appraisers until the market turns.