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15-02: Mass Appraisal of Land Values
For more information or signing up, please contact Colatruglio@iaao.org
Where Do We Begin?
International Association of Assessng Officers, United States of America
One of the earliest applications of mass appraisal techniques is the cost approach. Of the three classic approaches to estimating value (cost, comparable sales and income) the cost approach is the easiest to learn and apply.
Based on the principle of substitution, which states that a buyer will pay no more for an improvement than the cost of constructing another improvement of equal utility, the cost approach is dependent on data that is readily available virtually everywhere. The user needs to establish the cost of building an improvement of average quality and size and the relative contribution of different levels of quality and additional amenities. Each of these can be placed in a schedule that forms the basis for future cost estimates.
One of the benefits of the cost approach is the ability to separate the land and the building values. The steps in applying this approach are to calculate the value of the land on which the improvement is to be located. Calculate the cost of constructing the improvement. Subtract the total amount of accrued depreciation from that total cost and, finally, add the result to the land value.