Question

The ratio of land value to building value is used when estimating site value by the

a. sales comparison method.
b. allocation method.
c. subdivision development method.
d. land residual method.

Answer 1

Answer:

The ratio of land value to building value is used when estimating site value by the allocation method.

Explanation:

It is used for site and land valuation or appraisal.  Allocation method  is ideal when comparable are not given or known. When a new home is constructed on land area that has been recently bought or purchased, then Allocation method will be ideal . It is best suitable when given as percentage or proportion of the property’s total value that has been improved.

But when comparable improved sale is used , land or the building portion of the property should be determined first. For a newly built home , cost of improvements divided by the sales price of the home gives the percentage of improvements compared to purchase price of  comparable.This method is not ideal for older homes.  

To apply this method

• First identity a comparable site or comparable land with vacant home sales as well as vacant lot sales.  

• Next, find out  value of the land to total property values ratio.  

• Then, apply the ratio to the property that is being appraised. This will determine the appropriate value of the land or site.