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Land appraisal is needed whenever a lender is asked to loan money based on land. Loans based on land a typically capped at 60 to 80 percent of the appraised value of the land. This will depend to a large extent on the income and credit history of the potential borrower. The lender will have more security with a land loan than with most types of loan, and that will make them more amenable to lend to people who would not otherwise be considered for credit.

Having said that, lenders do not ever want the job of taking back land and having to sell it to cover bad loans. They would much sooner make money from the business of lending it to people who are able to, and will, pay back the loan as scheduled. Because of this, there are limits as to how far the lenders will go even though the collateral on offer is as secure as you can get.

Once this percentage of the land value has been decided by the lender, the lender then has the task of getting an accurate appraisal of value. Appraisals are carried out by certified appraisers who have a license awarded to them by the state they operate in. These appraisers will also be trained to appraise real estate, as a lot of land will have buildings on it. These buildings can vary anywhere between luxury houses, and derelict old buildings which will need to be demolished, and which will add absolutely nothing to the value of the land itself.

Land appraisal is not an exact science, which is why it is always worth getting a second opinion if you feel the valuation is far removed from your own estimate. You can do this simply by going to another lender, or you can have the land valued independently by a professional with no vested interest in serving a particular lender.