Module06 - Outline

Module06 Outline - Module 6 Land valuation Valuing the Site Objectives 10.1 10.2 10.3 10.1 Purpose of Land or Site Value Estimates The Four Methods

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Module 6 – Land valuation Valuing the Site Objectives 10.1 Purpose of Land or Site Value Estimates 10.2 The Four Methods Used to Appraise Land 10.3 How to Use Market Comparison Techniques 10.1 PURPOSE OF LAND OR SITE VALUE ESTIMATES This section outlines the several purposes of site value appraisals. Appraisals of Acreage or Vacant Land Appraisals of undeveloped land are made for many market-related, legal, and public purposes, including the following: 1. Sale and purchase 2. Development 3. Financing 4. Land leasing 5. Government actions 6. Agriculture 7. Court actions Allocation of Value for Tax Purposes 1. Ad Valorem (or “according to value”) property assessments are usually imposed on land and improvements as two separate amounts. 2. Income tax laws require that a purchase price be allocated to land and improvement values, when depreciation is to be claimed. Site Value in the Three Value Approaches Site or land value estimates are used in all three approaches to value. 1. The cost approach requires an estimate of the site value. 2. Certain techniques in the income approach rely on a separate site value. 3. The sales comparison approach may need an allocated site value to use some analysis techniques. 10.2 THE FOUR METHODS USED TO APPRAISE LAND This section reviews the importance of highest and best use, and covers the four recognized methods of appraising land. Importance of Highest and Best Use The highest and best use is defined as that reasonable and profitable use that will support the highest land value as of the date of the appraisal. 1 . An opinion of highest and best use is required by USPAP in all market value appraisals. 2. The highest and best use provides the basis for land valuation.
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Highest and Best Use Criteria To qualify as the highest and best use, any suggested use must be: 1. Physically possible 3. Economically feasible 2. Legally permissible 4. Maximally productive Appraising Land By The Market Method The market, or direct sales comparison, method is preferred above the other methods of appraising land. Like the sales comparison approach used to appraise improved properties, the market method relies on comparable sales. The Basis and Criteria of Comparison 1. The property is always compared as if it were vacant land, available for its highest and best use. 2.
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This note was uploaded on 09/17/2011 for the course CGS 3300 taught by Professor Kaleem during the Spring '08 term at FIU.

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Module06 Outline - Module 6 Land valuation Valuing the Site Objectives 10.1 10.2 10.3 10.1 Purpose of Land or Site Value Estimates The Four Methods

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