Why does extraction become unreliable when the improvements are new and substantial?

Correct Answer

B) The land share is small, so errors distort it heavily

Why this is correct: When improvements dominate value, the land residual is a small difference between two large numbers (sale price and improvement value). Even minor errors in estimating improvement cost or depreciation are magnified in the land value result. Why the other choices are wrong: "New buildings cannot have their cost estimated at all" is wrong; cost can be estimated. "Extraction may not be applied to residential property" is wrong; it can be applied but is often unreliable. "Depreciation must be zero, which the method forbids" is wrong; extraction can be used with zero depreciation, but the reliability issue remains. Exam tip: Use extraction cautiously; it's most reliable for older properties where improvements contribute less to total value.