In the land residual technique, which value must be known before the calculation can proceed?
Correct Answer
A) The value of the building improvements
Why this is correct: The land residual technique solves for land value. Therefore, the value of the building improvements must be known as an input, typically from the cost approach (cost new minus depreciation). Why the other choices are wrong: "The value of the site being appraised" is wrong; that is the unknown output. "The total value of the whole property" is wrong; that is also an output if using the income approach. "The price paid at the most recent sale" is wrong; sale price is not a direct input for the land residual calculation. Exam tip: Land residual inputs: building value, building cap rate, land cap rate, and total NOI. Output: land value.
Why This Is the Correct Answer
Why this is correct: The land residual technique solves for land value. Therefore, the value of the building improvements must be known as an input, typically from the cost approach (cost new minus depreciation). Why the other choices are wrong: "The value of the site being appraised" is wrong; that is the unknown output. "The total value of the whole property" is wrong; that is also an output if using the income approach. "The price paid at the most recent sale" is wrong; sale price is not a direct input for the land residual calculation. Exam tip: Land residual inputs: building value, building cap rate, land cap rate, and total NOI. Output: land value.
More Land/Site Questions
Under which condition is the land residual technique most applicable?
Why can the same physical parcel carry different values in two assignments?
In a built-up area where no vacant land has sold for years, which approach to site value is the usual fallback?
How is entrepreneurial profit treated in the subdivision development method?
A land comparable sold 18 months ago in a market rising about 4 percent a year. What adjustment direction applies?
Why does a developer's required profit rise for a longer subdivision project?
How does holding cost enter the valuation of land bought for future development?
Excess land is best described as land that has which characteristic?
Plottage value arises in which of the following situations?
Which of the following is an off-site improvement rather than a site improvement?
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