Property Valuation
The 'land residual technique' in Colorado appraisal is used to:
ADetermine the value of improvements only
BEstimate land value when comparable land sales are scarce by capitalizing the income attributable to the land✓ Correct
CDepreciate land value over time
DCalculate property taxes on vacant land
Explanation
The land residual technique estimates land value by capitalizing the net income remaining after attributing a return to the improvements. It is used when direct land sales comparables are not available.
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Key Terms to Know
Appraisal
A professional estimate of a property's market value prepared by a licensed or certified appraiser.
Capitalization Rate (Cap Rate)A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
Comparable Sales (Comps)Recently sold properties similar in size, condition, and location used by appraisers and agents to estimate a property's market value.
DepreciationA reduction in the value of an improvement (building) over time due to physical deterioration, functional obsolescence, or external factors.
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