Which method is used for land valuation?

The sales comparison method is a widely used approach for land valuation because it relies on the principle of substitution, which states that a buyer will not pay more for a property than the cost of acquiring an equally desirable substitute property. This method involves comparing the subject land parcel to recently sold parcels that are similar in location, size, zoning, and other relevant characteristics.

By analyzing the sale prices of these comparable parcels, an appraiser can determine a market value for the subject land. This approach is particularly effective in active markets where sufficient sales data is available, allowing for a direct correlation with current market conditions.

While the other methods, like cost estimation and income capitalization, can contribute to overall property valuation, they are typically more suited for improved properties or situations where income generation is a significant factor. The cost approach focuses on the costs of developing or replacing a property rather than its market behavior, and the income capitalization method is used for investment properties, emphasizing expected income rather than land value alone. Thus, all these other methods either do not apply directly to land valuation or serve different purposes in the valuation process.