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 ESTIMATESThis section outlines the several purposes of site value appraisals. Appraisals of Acreage or Vacant LandAppraisals 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 ApproachesSite 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 LANDThis 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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