How does an appraiser typically determine the site value using the cost approach method?

Using the cost approach method to determine the site value typically involves assessing the land's intrinsic value and its potential as part of the overall property value. The appraiser focuses on the premise that the property's value can be defined as the sum of the land value and the value of any improvements made to it.

In this context, while replacement costs and estimating the cost of materials are relevant in determining the costs associated with improvements to the property, they do not directly ascertain the land's value. The sales comparison method, on the other hand, is a widely accepted technique for estimating site value. This method relies on the analysis of recent sales of similar properties to ascertain what buyers are willing to pay for comparable land. By evaluating these transactions, the appraiser can derive a value that reflects current market conditions, making it a more appropriate and effective tool for determining site value in the cost approach.

Ultimately, the sales comparison approach emphasizes market data and trends, which are vital for establishing a fair site value tailored to the specific characteristics and location of the land in question.