Illinois Real Estate Practice Exam

Which appraisal approach is most suitable for vacant land?

1. Sales Comparison Approach

2. Income Approach

3. Cost Approach

4. Land Valuation Approach

The correct answer is: Sales Comparison Approach

The Sales Comparison Approach is indeed the most suitable appraisal method for vacant land. This approach focuses on comparing the subject property to similar properties that have recently sold in the same area, also known as comparables. Since vacant land does not generate income, this method allows appraisers to establish a market value based on what buyers are willing to pay for similar parcels in the vicinity. This approach provides an accurate reflection of the market conditions and buyer preferences, which are particularly vital when assessing land. It is a direct measure of value based on actual sales data, making it very relevant for parcels without existing structures or income-generating potential. While the other methods can provide valuable insights in different contexts, they are not as effective for valuing vacant land. The Income Approach is generally used for income-producing properties, while the Cost Approach is more applicable for properties with improvements. The Land Valuation Approach, although it sounds relevant, is less commonly recognized as a standalone method compared to the established Sales Comparison Approach.