Certified Residential Appraiser Practice Exam

Which term describes a site valuation method that deducts the value of improvements from the total sales price to find land value?

1. Allocation Method

2. Surplus Land

3. Extraction Method

4. Sales Comparison Approach

The correct answer is: Extraction Method

The extraction method is a valuation technique used to determine the value of a site by subtracting the value of improvements from the total sales price of a property. This approach operates on the principle that the total value of a property is made up of the intrinsic value of the land plus the value of any structures or improvements upon it. By analyzing sales of similar properties and deducting the estimated value of any buildings or improvements, appraisers can isolate the value of the land itself. This method is particularly useful in situations where the improvements may not significantly impact the value of the land, allowing for a clear assessment of the land's market value. The extraction method relies heavily on accurate estimations of improvement values, which can involve either appraiser judgement or comparable data. While there are other valuation methods available, the extraction method specifically focuses on determining land value through this deductive approach, reflecting a precise calculation that aids appraisers in providing a reliable valuation of vacant or under-improved sites.