Question

Fred Pharquar, appraiser, has the task of appraising a residential site close to the downtown core of Fernie. Fred has observed a pattern in the ratio of building to land value in the downtown core. There have not been many recent sales. Which method would the most appropriate to use to establish an approximate land value?

(1) Allocation method

(2) Land residual approach

(3) Ground rent capitalization

(4) Direct comparison approach

Answer 1

Solution:

Option 4 - Direct Comparison approach

Since there are visible patterns of the ratio of building to land value and also there are a limited number of previous sales of properties in the area it would be best to conduct a direct comparison to get the idea about the value of the properties. Using direct comparison offers a straight forward way of developing the value of the property. Compare the property with similar others and gauge the value of the property with a direct comparison with previous sales as well.