Which method is typically used to estimate the value of vacant land?

The sales comparison approach is typically employed to estimate the value of vacant land because it relies on the principle of substitution, which assumes that a buyer will not pay more for a property than what it would cost to purchase an equivalent substitute. This method involves analyzing recent sales data of similar properties in the same area to establish a market value.

When assessing vacant land, the unique characteristics of the lot, such as size, location, and zoning, are critically important. The sales comparison approach allows for these factors to be weighed against comparable sales, giving a realistic estimate based on current market conditions. This method is particularly effective for vacant land because there are generally fewer complexities such as existing structures or income streams, which makes it easier to find comparable sales data.

Other methods like the cost and income approaches are less suitable for vacant land. The cost approach might be more relevant for improved properties where you can assess the cost to rebuild and account for depreciation, while the income approach is most applicable to income-generating properties where rental income can be analyzed. The reconciliation approach, on the other hand, involves weighing multiple valuation methods but does not stand alone as a primary method of valuing vacant land.