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Value Land of Property

Although total property estimation may be brought forth from direct comparison or income approaches without separating land and building values, it may be needed to value the parcel separately to detach the land figure from the overall real estate worth. In the cost approach, it is an absolute necessity to estimate land and improvements separately.

Creating an opinion of land value can be presented as a separate hurdle in the valuation process. You may use several techniques to attain an expression of land value including the following:

  • Direct Comparison
  • Extraction
  • Land Residual
  • Ground Rent Capitalization
  • Subdivision Development
  • Allocation

Usually the most accurate and effective of the techniques to derive a land value is the direct comparison approach. However, when there are a limited number of sales available or when the estimate produced needs addition support, other techniques could be used to back up the comparison approach such as the ones previously mentioned. With the allocation technique, either sale transactions of improved properties may be analyzed or the total prices paid would be allocated between land and the improvements. Comparable sites under development may also be analyzed and the cost of the finished properties should be allocated between the parcel and improvements or buildings. Under the extraction technique, land value is determined by subtracting the estimated value of the depreciated improvements from the known sale price of the property.