Why is site value estimated as though the site were vacant and available for its highest and best use?

Correct Answer

D) Because the cost approach requires that premise

Why this is correct: Because the cost approach requires that premise. The cost approach adds land value to depreciated improvement cost. Valuing the site as if vacant and available for its highest and best use prevents double-counting the building's influence and tests if the current use is optimal. Why the other choices are wrong: Lenders require vacant-land comparables is not a universal principle; site value can be estimated by various methods. Zoning is measured only for vacant parcels is false; zoning applies to improved parcels as well. Existing improvements never affect land value is incorrect; improvements can influence land value, but the cost approach isolates the land's contributory value. Exam tip: The vacant and available premise is foundational to the cost approach's logic.