Which site valuation method is generally the most reliable when sales of comparable vacant parcels are available?
Correct Answer
A) The sales comparison method
Why this is correct: The sales comparison method is the most direct and reliable approach when adequate data exists. Sales of comparable vacant parcels provide direct market evidence of what buyers pay for land, minimizing the need for estimations and deductions that introduce error. Why the other choices are wrong: "The land residual method" is an indirect income-based method used when direct land sales are lacking. "The ground rent method" capitalizes lease income and is less direct. "The allocation method" uses ratios from improved sales and is less precise. Exam tip: Direct market evidence (comparable sales) is always preferred over indirect methods when available.
Why This Is the Correct Answer
Why this is correct: The sales comparison method is the most direct and reliable approach when adequate data exists. Sales of comparable vacant parcels provide direct market evidence of what buyers pay for land, minimizing the need for estimations and deductions that introduce error. Why the other choices are wrong: "The land residual method" is an indirect income-based method used when direct land sales are lacking. "The ground rent method" capitalizes lease income and is less direct. "The allocation method" uses ratios from improved sales and is less precise. Exam tip: Direct market evidence (comparable sales) is always preferred over indirect methods when available.
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A land comparable sold 18 months ago in a market rising about 4 percent a year. What adjustment direction applies?
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Previous Question
Vacant lots in a subdivision sell for about $80,000 while finished homes there sell for about $400,000. Applying that relationship to a subject home that sold for $525,000, what site value does allocation indicate?
Next Question
In a neighborhood where land typically represents 22 percent of total property value, a house sells for $425,000. What does the allocation method indicate for the site?