Certified Residential Appraiser Practice Exam

Which method values land by subtracting the estimated value of improvements from the total sales price?

1. Allocation Method

2. Extraction Method

3. Sales Comparison

4. Assemblage Method

The correct answer is: Extraction Method

The extraction method values land by taking the total sales price of a property and subtracting the estimated value of the improvements made to it. This technique is particularly useful in situations where comparable sales of land alone are not readily available, allowing appraisers to isolate the land value from the overall property value by focusing on the improvements. In practice, an appraiser will analyze comparable properties that have recently sold, determine the value of the structures (improvements) on those properties, and then subtract that figure from the total sales price to arrive at the land value. This method is effectively used when working with single-family homes or small residential properties, where the improvements can be distinctly appraised. Other methods mentioned, such as the allocation method, the sales comparison, and the assemblage method, serve different purposes. The allocation method uses a ratio based on sales of similar properties to estimate land value. The sales comparison method evaluates the property compared to other similar properties but does not focus specifically on separating land and improvements. The assemblage method deals with the combination of two or more parcels of land, which is distinct from determining the value of land based on improvements.