Which technique is used when land values are available, but the cost or depreciation on a building is difficult to estimate?

The building residual technique is particularly useful in scenarios where land values are known but estimating the cost or depreciation on a building proves challenging. This technique involves determining the value of the land, followed by estimating the total property value based on the land value and any income-producing potential of the property.

In this method, the value of the overall property is assessed, and then the known land value is subtracted from it to arrive at the building's residual value. This can be advantageous when dealing with unique properties or unusual circumstances where traditional calculation methods for the building may not yield reliable results. By focusing on the residual aspect, appraisers can establish a relationship between the income the property generates and its value, which is particularly applicable in situations where the building's specific costs are hard to define clearly.

In contrast, the other techniques mentioned would not be as effective in this specific situation. For instance, capital recapture primarily focuses on the return of investment for improvements rather than on land value specifically. Discounted cash flow analysis relies heavily on estimating future cash flows, which may not address the current challenges regarding building depreciation effectively. The land residual technique, while also involving the land value, emphasizes the income generated from the land rather than focusing on the building's value,