Property Valuation
What is 'land residual technique' in real estate appraisal?
AA method subtracting improvement value from total value to estimate land value
BA capitalization method attributing residual income to land after the improvement's return is deducted; used to value land as if improved to highest and best use✓ Correct
CA technique using residual land inventory to forecast future values
DA method calculating the value of land after all required improvements are installed
Explanation
The land residual technique is used to estimate land value when no comparable vacant land sales are available. The appraiser assumes a hypothetical improvement at highest and best use, calculates the NOI from that improvement, deducts the return attributable to the improvement (replacement cost times a building capitalization rate), and capitalizes the residual income attributable to the land. This technique is mainly used in complex commercial valuation problems.
Related Illinois Property Valuation Questions
- What does 'functional obsolescence' mean in property valuation?
- A gross rent multiplier (GRM) of 120 is applied to a property with monthly rent of $2,500. What is the estimated value?
- An appraiser adjusting for location differences between the subject property and a comparable uses which type of adjustment?
- If a comparable property sold for $310,000 and had an extra full bathroom that the subject property lacks, the appraiser would make what kind of adjustment?
- Functional obsolescence in a property refers to:
- The gross rent multiplier (GRM) method of valuation is calculated as:
- A capitalization rate of 5% versus 10% on similar properties would indicate that the property with a 5% cap rate:
- In the sales comparison approach, a gross living area (GLA) adjustment is made because:
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