Property Valuation
What is the land residual technique in real estate appraisal?
ACalculating the value of leftover land after development
BDetermining land value by subtracting improvements value from total property value✓ Correct
CEstimating land value using comparable land sales
DA technique for valuing contaminated land
Explanation
The land residual technique calculates land value by subtracting the attributed value of the improvements from the total property value. If the total property value and improvement value are known, the land value is what remains.
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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.
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.
Capitalization Rate (Cap Rate)A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
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