A California appraiser is estimating land value as part of the cost approach for a residential property in the Silicon Valley. The appraiser finds that comparable vacant lot sales in the area are extremely rare because virtually all land has been developed. Which alternative method of land valuation is MOST appropriate?
Correct Answer
C) The extraction method, which subtracts the depreciated improvement value from the total sale price of improved properties to isolate land value
When comparable vacant lot sales are unavailable (common in built-out areas of California like Silicon Valley), the extraction method is the most appropriate alternative. This method takes the total sale price of improved properties, subtracts the estimated depreciated cost of the improvements, and the remainder is attributed to the land value.
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Previous Question
In California, an appraiser is using the cost approach to value a home that was damaged in a wildfire in a designated Very High Fire Hazard Severity Zone (VHFHSZ). The home has been partially rebuilt with fire-resistant materials as required by California Building Code Chapter 7A. How does the rebuild with fire-resistant materials affect the cost approach?
Next Question
When using the cost approach for a California property, all of the following are deducted from the replacement cost new to arrive at the depreciated improvement value EXCEPT: