What appraisal method is commonly used for a property with known building value but unknown land value?

The land residual method is the appropriate appraisal technique in situations where the value of the building is known but the land value is uncertain. This method essentially involves estimating the total value of the property and then subtracting the value of the improvements (the building) to derive the land value. By using known building costs or income generation potential, an appraiser can effectively isolate the value attributable to the land itself.

In practice, the land residual approach is particularly useful in dense urban areas where properties are often valued based on their potential use and income generation, while the land may have varying values based on market conditions. This method allows for a more precise valuation of the land, reflecting its highest and best use, based on the income produced by the improvements.

Other appraisal methods, such as yield capitalization and direct capitalization, focus on different valuation aspects. Yield capitalization is primarily used for income-producing property analysis and requires data on expected future cash flows and returns. Direct capitalization also emphasizes the income stream, typically applied when both land and improvements are known. The buildings residual technique is less relevant in this context, as it focuses more on determining the value of a building while assuming the land value is known. This clearly delineates why the land residual method is the most effective choice for