What technique is applied when the building value is known, but the land value is unknown?

The technique used when the building value is known but the land value is unknown is the land residual technique. This approach focuses on determining the value of the land by subtracting the known value of the improvements (the building) from the total value of the property. Essentially, this method operates on the principle that the total property value is comprised of the value of the land and the value of any buildings or improvements on that land.

By applying the land residual technique, appraisers can derive the land value by taking into account the income generated by the property and deducting the expenses related to the building. This is particularly useful in scenarios where the building has a defined value but the land's contribution to total value needs to be estimated. This technique is especially applicable when evaluating income-producing properties as it connects with assessing the overall performance of the investment.

Understanding this technique is important as it allows for an accurate assessment of property value when all components are not readily available, helping appraisers ascertain the contribution of land in the overall value calculation in the real estate market.