The CE Shop Appraisal Practice Exam

The equation "Value of land = Anticipated sales of finished lots - development costs" accurately describes the Subdivision method of land valuation. This method is focused on determining the value of land that is to be developed into a subdivision, which involves estimating the future sales revenue from finished lots after accounting for the costs required to develop the land.

In the Subdivision method, each factor in the equation plays a crucial role: anticipated sales of finished lots represent the potential income from selling individual lots, while development costs refer to all expenses incurred to prepare the land for sale, including infrastructure and improvements. By subtracting development costs from anticipated sales, appraisers are able to arrive at a value that reflects the present worth of the land based on its development potential.

This approach is particularly relevant in real estate where large tracts of land are being considered for subdivision into individual lots, and it highlights the anticipated financial outcomes of the project. Thus, it serves as a practical evaluation technique for assessing land value in real estate development scenarios.