Which approach to value considers the land separately from the value of improvements?

The cost approach to value is the method that distinctly considers land separately from the value of improvements. This approach assesses the value of the land as if it were vacant and pertaining solely to the parcel itself. It calculates the cost to replace or reproduce the improvements on the land and then adds this amount to the land value.

In this approach, the appraiser first determines the current market value of the land without any structures, which reflects its highest and best use. After establishing this land value, the appraiser then evaluates the cost to replace or rebuild the property's improvements, deducting any depreciation from this amount. This separation enables a clear understanding of how much the land contributes to the overall value of the property independent of any structures or enhancements on it.

The other approaches do not emphasize this separation. The market data approach relies on comparing sales of similar properties to determine value and often integrates both land and improvements into a singular valuation. The income approach focuses on the income potential of the property, looking mainly at the cash flows generated by the property rather than breaking down the land and improvements. Functional obsolescence relates to declines in value caused by inefficiencies or inadequacies in the property, rather than a valuation based on land and improvements separately.