The ratio of land value to building value is used when estimating site value by the allocation method.
Explanation:
It is used for site and land valuation or appraisal. Allocation method is ideal when comparable are not given or known. When a new home is constructed on land area that has been recently bought or purchased, then Allocation method will be ideal . It is best suitable when given as percentage or proportion of the property’s total value that has been improved.
But when comparable improved sale is used , land or the building portion of the property should be determined first. For a newly built home , cost of improvements divided by the sales price of the home gives the percentage of improvements compared to purchase price of comparable.This method is not ideal for older homes.
To apply this method
First identity a comparable site or comparable land with vacant home sales as well as vacant lot sales.
Next, find out value of the land to total property values ratio.
Then, apply the ratio to the property that is being appraised. This will determine the appropriate value of the land or site.
<span>The theory of cumulative disadvantage states that inequality starts with people who have the greatest number of resources as well as the opportunity to gain additional resources. Many times, these advantages go to people of higher social status while the poor and less educated have little means to acquire needed resources.</span>
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