As has already been noted, ground rent capitalized at an appropriate rate is the real basis of land value. There is another basis of value known as exchange value; it is the value which is indicated by sales prices, the prices at which similar land has been bought and sold. There is no such thing as an exact valuation of a piece of property, and an appraisal of it is nothing more than an opinion (although it may be that of an expert) as to its value. There are certain rules, however, that may be used as guides in determining land values.

Value has been defined as the price a purchaser who wishes to buy, but who does not have to buy, will pay to a seller who wishes to sell but who does not have to sell. In seeking to ascertain the value of any piece of property consideration should be given to the prices at which property, of the same character has been sold, provided the parties to such sales have been willing buyers and sellers. Actual sales are an excellent criterion of value. The expert in a proceeding under which land is taken for public purposes adds weight to his appraisal by getting on the record testimony of sales he has made or those of which he has knowledge. Ultimately, values as indicated by sales prices and those based on capitalized rentals will be equal, but at a given time the prices paid for land are often the expression of opinion of what it will be worth. The trend of a city's development may be anticipated and the future value of land discounted. The desire to anticipate values has at times led to speculation and to the selling of land at prices far in excess of actual value. The last buyers on a wave of speculation often find themselves possessed of land at prices which will not measure true value until years later.

In placing a value on a piece of land, care should be taken to ascertain any special features affecting it. This includes both its physical characteristics and its surroundings. Standard lot values usually mean values of the lots at grade, that is, on a level with the grade of the street. A piece of land above grade has a feature which detracts from its value - there will be some expense in removing the surplus soil. If the material to be removed to bring the lot down to grade, or to excavate for a building foundation, is rock, the added expense will be high and a very large deduction from the value of the ordinary lot must be made for it. The same principle would apply to land much below grade or having a muddy bottom. These conditions would require filling in and consequent expense, and may even make the site unsuitable for building purposes for some time to come.

Nuisances in the neighborhood detract from values. Anything noisy, unsightly, malodorous, or in any way objectionable to the senses makes the locality less desirable for many purposes. Some businesses and manufacturing establishments are considered nuisances, and to a certain degree so may schools, hospitals and other public institutions. It is of course fair to compare sales prices of property affected by similar adverse conditions, but in making comparisons with property free from defects and detracting influences, due allowance should be made for them.

The careful appraiser will note the presence or absence of street improvements, i.e. sidewalks, curbs, pavement, sewers, water pipes, electric light, and gas mains. He will also consider any limitation on the use to which the property may be put by reason of private restrictions and restrictions imposed by governmental authority. (In New York City, for example, the zoning resolutions adopted by the Board of Estimate and Apportionment restrict to certain uses a large part of the land within the city limits.)

It may be further noted that the trend of population or of business towards a locality, and existing and projected lines of transportation usually cause an upward trend of values. The change or discontinuance of certain means of transportation (or points of transfer from one kind of conveyance to another) may have the effect of reducing values of the property which is adversely affected by such changes.