The abstraction method estimates land value by subtracting what from the sale price of an improved property?

The abstraction method is a valuation technique used to estimate the value of land by taking the sale price of an improved property and subtracting the depreciated replacement cost of the improvements. This approach is grounded in the belief that the value of the land can be isolated from the overall value of the property by accounting for the cost of depreciated improvements.

When the improved property is sold, its total sale price reflects not only the value of the land but also the value of the buildings and other structures on it. To determine the land value, the cost associated with replacing those improvements—including depreciation—is subtracted from the sale price. The resulting figure is considered the land value, which helps appraisers ascertain how much the land itself is worth in the current market.

Other considerations such as market rent value, projected income potential, and the cost of land acquisition do not target the specific relationship between the property’s sale price and the value of improvements as effectively as the depreciated replacement cost does. Therefore, the subtraction of the depreciated replacement cost of improvements is the most accurate and relevant method for isolating land value in this context.