Henry is appealing the assessm
Henry is appealing the assessment of his property, as hebelieves the land value is too high, and he has hired an appraiserto provide him with valuation advice. There are no recent sales ofvacant parcels in his area, so the appraiser has used theallocation technique. Henry wants to better understand what it isthat the appraiser is doing and how this approach works. Which ofthe following statements would best describe this valuationtechnique to Henry?
(1) In this technique, a ratio of land value to property valueis extracted from comparable sales and applied to the sale price ofthe subject property to arrive at the land value.
(2) Allocation is a technique that allocates certain attributesof the property into certain monetary categories, giving rise to avalue based on many separate characteristics.
(3) The valuation technique calculates the value of the futurecash flows by discounting them to the present using the averagerate of interest.
(4) This technique places a base value on the property that isdirectly related to the location; this is then adjusted up or downbased on improvements.
Answer:
ALLOCATION TECHNIQUE IS THE MOST STRAIGHT FORWARD WAY OFVALIDATING ANY WELATH. IN THIS METHOD APPRAISER FINDS THE VALUES OFSIMILAR WEALTH AT THAT TIME POINT. THEN AFTER CONSTRUCTING A RATIOOF LAND VALUE TO TOTAL VALUE , VALUATION OF WEALTH IS DETERMINED.UNDER THIS METHOD BASICALLY COMPARISION IS DONE WITH OTHER SITEVALUES AND THE VALUE IS DETERMINED.
THUS HENRY BEING A LAYMAN BEST UNDERSTAND THE TECHNIQUE BY THESTATEMENT, “ratio of land value to property value isextracted from comparable sales and applied to the sale price ofthe subject property to arrive at the land value.” AS GIVEN IN THEOPTION. TO BE PRECISE, IN THE TECHNIQUE RATIO OF VALUE OFCOMPARABLE SITE TO TOTAL VALUE IS CONSTRUCTED TO VALIDATE THESITE.(1) IS THE CORRECT OPTION.
(2) IS WRONG BECAUSE UNDER THE TECHNIQUE COMPARABLE UNITS ARETAKEN INTO ACCOUNT AND NOT ATTRIBUTE OF SAME SITE.(3) IS WRONG BECAUSE HERE COMPARISION IS DONE BY RATIOS AND NODISCOUNTING IS DONE.(4) IS WRONG BECAUSE FIRST COMPARABLES ARE ANALYSED AND THENVALUATION IS DETERMINED. BUT THE OPTION SAYS FIRST VALUATION ISDONE THEN IT IS PULLED DOWN WHICH IS WRONG.
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