What is a parcel of land? Is it the same as a plot?

When it comes to buying or selling real property, all parties need to know about real estate terms and concepts. One such question they should know an answer to is what is a parcel of land? The confusion about land parcels arises mainly because the term is loosely defined. It’s a challenge to provide a straightforward definition. However, we will try to help you understand the term better, here. 

What does a parcel of land mean in the real estate industry?

In real estate, the word parcel is commonly used to describe a portion of land that has been officially separated from a larger area of land. This division is typically to sell, lease, or develop that specific piece of land. 

Think of a parcel of land as a defined area of land — an official piece separated from a larger tract of land. It’s like a slice of pie taken from the whole. The open space might be large or small, but it’s identified as one specific piece of real estate. Interestingly, the term “parcel” has been around for centuries, originating from the Old French word “parcelle,” meaning a small portion of land. Nowadays, it refers to any portion of land with clear, legal boundaries.

Why does understanding parcels of land matter?

Whether you’re a seasoned investor or a first-time homebuyer, understanding the concept of a parcel of land is key to making informed decisions. It’s not just about owning land – it’s about knowing the exact piece you’re responsible for, including property taxes, zoning laws, and how to maximize its value. Whether your parcel is a tiny residential lot or a sprawling tract of land, knowing what you own can save you a lot of headaches down the road.

And, you can approach real estate with more confidence, ensuring you make the best decisions for your financial future.

Parcel vs. lot: What’s the difference?

While the terms parcel of land and lot are often used interchangeably, there can be subtle differences in their connotations. Generally, both refer to a specific, designated piece of land. “Parcel of land” is a broader term that encompasses any defined portion of land, whether large or small, often used in legal and surveying contexts. On the other hand, “lot” is commonly associated with smaller sections of land, particularly in residential areas.

A parcel of land is essentially identified for real estate tax reasons. It might consist of one or more lots, and these lots don’t necessarily have to be next to each other. This setup makes it easier for local governments to gather property taxes, especially from individuals who own numerous properties.

How is a parcel of land measured?

Land surveyors employ a combination of fieldwork and technology to establish precise property boundary lines. They take into account natural features, existing markers, and legal descriptions. Today, surveyors use advanced techniques such as GPS technology and satellite imagery. 

The resulting measurements are often in terms of square footage or acres, providing a clear understanding of the land’s size and shape. These measurements are crucial in real estate transactions, property development, and ensuring adherence to zoning regulations in the United States.

Why do you need to consider zoning laws when buying a parcel of land?

Before buying or developing a parcel of land, it’s crucial to understand local zoning laws. These laws dictate how a parcel can be used — whether it’s for residential homes, commercial buildings, or something else. Keep in mind that zoning laws vary widely by location. So, what works for one area might not apply to another. If you’re thinking of building on a parcel, you’ll need to ensure the land use aligns with local zoning regulations.

How is the property tax calculated on a parcel of land?

Like any piece of real estate, each parcel of land is subject to property taxes. The tax amount may vary from one parcel to another based on factors such as the land’s assessed value, any applicable exemptions or deductions, tax credits, or special assessments.

The calculation of property tax on a parcel involves assessing the property’s value and applying a local tax rate. Local tax assessors determine the assessed value of the land, considering factors such as property size, location, and market value. Here’s the formula they follow:

Property Tax = Taxable value ÷ 1,000 × millage rate.

Do I need to buy or sell the entire parcel? 

If the parcel includes more than one lot, you can buy or sell individual parts. However, you will need to coordinate with your county tax assessor’s office for this process, as it has tax implications. When dividing a parcel, the tax assessor must be informed about the specific divisions to accurately assign property taxes. Remember that by dividing the parcel, you’re creating new taxable properties, and the tax assessor will need to know the specifics. Failing to do so might result in paying taxes for land that you no longer own.

Read more: Selling land without a realtor

Bottom line

A parcel of land is a specific area with clear boundaries. And, the term is commonly used to describe both large and small properties. The size of a parcel can vary significantly based on its location and features. It might be as compact as one-fifth of an acre or extend to several hundred acres, with larger parcels often situated in rural areas where there’s ample open space.

In urban settings, you’ll typically find smaller to medium-sized parcels, typically up to 10 acres. Understanding the concept of a parcel of land is crucial for empowering property owners to make wise investments and build a diverse land portfolio.

Read more: What is plottage in real estate?

Written by Ramona Sinha. October 28, 2023

Ramona is a senior content writer for Kukun. This experienced blogger uses simple and succinct words to decipher the complex phenomenon called life. She has written articles covering a broad range of topics, such as real estate, lending and mortgage, finance, business, taxation, home designs, home improvement projects, decor concepts, and more. An avid traveler, she’s a digital nomad at heart and an animal lover from the depth of her soul.