Lot size adjustment in appraisal

Why lot size is harder than GLA

In most neighborhoods buyers pay for a typical site first and extra land at a much lower marginal rate. Past a point, additional area may add little at all, and utility (shape, topography, usable yard, easements) often matters more than raw square footage. A single dollar-per-square-foot figure applied across a wide range of lot sizes usually overstates the adjustment for large differences.

Deriving the rate

1. Paired sales. Find sales similar in GLA, age, condition and location that differ mainly in site size, then divide the price difference by the lot-size difference. Repeat across several pairs within the subject's typical lot range.
2. Regression. Include lot size alongside GLA and the other characteristics that drive price locally. The lot coefficient is the marginal rate with those held constant; check its p-value and confidence interval, because lot size is often weakly supported in small datasets.
3. Non-linearity. If the market treats land in tiers, derive separate support for the typical range and for oversized sites, or use lot-size brackets rather than one straight-line rate.

Applying it in the grid

With a subject site of 9,000 sq ft, a comparable site of 12,000 sq ft, and an illustrative derived rate of $3 per square foot of site:

(9,000 − 12,000) × $3 = -$9,000

The comparable has more land, so its price is adjusted downward. Measure site area the same way for every sale, and keep the difference within the range your support actually covers.

Documenting the support

Report which sales and period the rate came from, whether the relationship was treated as linear, and why it is reasonable for this market. Try the adjustment calculator, compare with paired sales analysis, or read how regression diagnostics show whether a lot coefficient is well supported.