Property Valuation
A Texas appraiser values a large tract of land that will be developed as a residential subdivision. The appropriate method is:
ADirect capitalization using lot rents
BThe subdivision development method, analyzing lot sales revenue minus development costs and appropriate profit✓ Correct
CThe cost approach only
DThe income approach using residential rents
Explanation
The subdivision development method (also called the land development approach or discounted cash flow approach for subdivisions) analyzes the projected revenues from lot sales, deducts development costs, and applies a discount rate to derive the current value of the raw land.
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