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Valuing waterfront properties can be quite different from most other (non-waterfront) residential properties.  The major difference is land value is a majority of the value in most instances.  As you must suspect, land value is normally much less of the total value with non-waterfront.  As a result, the absolute most important factor in valuing any waterfront property is most often assessing the land.  Land is the “scarce” commodity, and it is the portion of a property most likely to increase in value over  time.  The improvements on the land, like a home, pool, or whatever, will depreciate over time, and they are not a scarce commodity.  Valuing the improvements is most often similar to the approach for non-waterfront.  

We have many instances where valuing waterfront includes an older home and the land can be as much as 90% of the value.   I have carefully tracked the land values for various types (Gulf front, Bayfront, Gulf-to-Bay) on Casey Key for the past 20 years, and the average annual gains have been in double digits.  That doesn’t mean it goes up in value by 12% or so each and every year, but that is what it has averaged over extended periods of time.  During those 20 years we have had two major spurts in values  - 1988-1990 and 1998-2000 - when the land values doubled within a 2 year span.  We have also had many years when the values were flat or increased less than 5% on an annual basis.  As they say, past performance doesn’t guarantee future results, but when it comes to real estate I think the odds are more in your favor.  Although I do not have such specific figures for other Sarasota County waterfront, I have researched enough to believe the results have been quite similar on other Keys as it has been on Casey Key.  However, land values vary considerably.  For instance, on Casey Key a Bayfront lot of approximately 100 foot width sold in recent years for $600,000 in one instance, and in another instance $2,150,000.  The range today (2007) is  between $1 million and $2 million (or $10,000 ro $20,000 per front foot).  Beachfront land (not including the value of a home on the property) ranged from $2,100,000 to over $3.5 million in value in recent years for a 100 foot wide lot.  The variance was principally due to difference in location on the Key, but there are normally many other considerations.

The Challenge of Determining Fair Market Value

Whether a buyer or a seller of waterfront properties, we all have the opportunity today via the internet and other means of gaining greater knowledge and information to help in determining the realistic current market value for a property.  Some have used this to their advantage, but certainly not all.  My own experience is buyers tend to do more homework than sellers.  Whether a buyer or a seller, determining today’s fair market value for a residential property is not a matter of just cranking some numbers into a computer or looking at how much a neighboring property sold for or is asking.  Except in a momentum market like we had in 2004 and 2005, I strongly advise ignoring asking prices.  

It takes intimate knowledge of the important attributes (see below) of a property being valued, along with knowledge of recent sales of comparable properties and the current real estate market climate in the immediate area.  A seller may have fairly intimate knowledge of their own property, but too often it is from their perspective and not from the perspective of a prospective buyer.  When you have land values double and even triple or more from when a seller acquired the property to the time they decide to sell, they often lose sight of what a buyer in this new much higher price range really desires.  And, for both sellers and buyers a most difficult task in this process is determining just what are comparable properties to consider in making a valuation.  If we were in the boom and market frenzy period the offering prices of currently available properties would gain some consideration in a valuation analysis, but that is not the case in our current type of market.  Today the focus must be on properties that have recently sold and those selling prices.  Therefore, what is one to do?  In my opinion, a buyer or seller must at a minimum educate themselves to the appropriate process and considerations one must take into account in placing a current fair market value on a property. 

There are 12 Factors (maybe more in some cases) one has to take into account:
        1. Location—Location on the Key (favorable or less favorable)

        2. Width on principal Waterfrontage in feet 

        3. Total size of lot - square feet/acreage - depth of lot, etc.

        4.  Size of Building Footprint using current regulations taking into 
           account the location of setback lines and other setbacks

        5.  Location and Effect of Coastal Setback Lines (GBSL & CCCL)
             County and State Lines

        6.  Elevation as compared to FEMA Requirements & possibly elevation
             required if seaward of  State CCCL

        7.  Views (unobstructed vs obstructed) from Current or Prospective 
             Home

        8.  Value of Surrounding and Nearby Homes - Are they comparable

        9.  Basic Type of Lot  (Bayfront; Gulf front;Gulf-to-Bay: or Non-
             Waterfront)

       10.  Easements across for others or one in favor of the property

       11.  Beach and/or Boating Attributes (stability & depth of the beach; 
             dockage and depth of water for bayfront )

       12.  Similar and Comparable Recent Sales