What approach do appraisers use in the Building Residual Technique to find the value of improvements?

The Building Residual Technique relies on the residual method, which is instrumental in appraising the value of improvements made to a property. This technique calculates the value of a property by determining the total value of the property and then subtracting the value of the land, resulting in the remaining value attributed to the improvements (such as buildings or other structures).

In practice, this method is particularly useful in scenarios where the land has a known market value and the income generated by the property can be assessed. By first estimating potential income from the entire property and then calculating the amount that must be allocated to the land, appraisers can effectively find the value associated with the improvements.

The other approaches, such as the cost approach, income approach, and sales comparison approach, serve different purposes and rely on different methodologies. The cost approach emphasizes the cost to replace or reproduce the property, while the income approach focuses on the income potential of the investment. The sales comparison approach involves analyzing comparable sales data. However, the building residual technique specifically utilizes the residual method to directly assess the value of the improvements based on their contribution to overall property value.