What is the principal weakness of the allocation method?

Correct Answer

B) The typical ratio may not fit the subject property

Why this is correct: The principal weakness of the allocation method is that the typical land-to-value ratio derived from the market may not fit the subject property. The method applies a market-extracted average ratio to the subject's total value. However, individual properties often deviate from the average due to unique characteristics like lot size, building size, or location. Applying an average ratio to an atypical property produces an unreliable land value estimate. Why the other choices are wrong: "It requires many recent sales of vacant parcels" describes the sales comparison approach for land. "It cannot be applied to residential property at all" is false; allocation is commonly used for residential properties. "It depends on a ground lease already being in place" describes the ground rent capitalization method. Exam tip: Allocation provides a quick check, but its result is only reliable if the subject property is typical of the market from which the ratio was derived.