When valuing a vacant lot, which appraisal approach is typically used by appraisers?

• A. Reconciliation approach
• B. Sales comparison approach
• C. Income approach
• D. Cost approach

Answer: (B)

Vacant land is valued primarily by the sales comparison approach because market value for raw parcels comes from what buyers are willing to pay for similar lots in the same area. This method relies on recent arm’s-length sales of comparable parcels and then adjusts for differences in size, shape, frontage, access, zoning, utilities, topography, and any encumbrances. Since there are typically no income streams from vacant land and there aren’t depreciable improvements to analyze, the income and cost approaches are less informative for valuing raw land. The cost approach isn’t the usual choice here unless there are no good comparable sales, but when active land sales exist, the sales comparison approach provides the most direct reflection of current market conditions.