In which appraisal approach to value would the value for the land be calculated separately?
Correct Answer
D) Cost.
In the cost approach, the appraiser first estimates the value of the land as if it were vacant and available for its highest and best use, typically using the sales comparison method applied to comparable vacant land sales. The appraiser then separately estimates the replacement or reproduction cost of the building new, subtracts all applicable forms of depreciation — physical deterioration, functional obsolescence, and external obsolescence — and adds the resulting depreciated building value to the land value to arrive at a total property value estimate. This two-component structure is the defining characteristic of the cost approach and is why it is the only approach that explicitly and separately calculates land value as a distinct step in the valuation process.
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