Property Valuation
What is 'land residual technique' in real estate appraisal and when is it applied?
AA technique apportioning value residually between land and improvements after mortgage payoff
BA technique used when the land value is unknown; it values improvements using the cost approach and attributes any remaining income/value to the land✓ Correct
CA Pennsylvania technique for allocating Realty Transfer Tax between land and building value
DAn appraisal method requiring the appraiser to visit residual (remaining) comparable sales
Explanation
The land residual technique is used when comparablesales data for vacant land is limited. The appraiser values the improvements (using cost or income capitalization) and subtracts the income attributable to them from the property's total income.
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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.
Transfer TaxA tax imposed by state or local governments when real property ownership is transferred, typically based on the sale price.
State-Specific Concepts
Transfer Tax
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