What is the basis for valuing land using the market approach?

The basis for valuing land using the market approach revolves around the principle of substitution, which posits that a buyer will not pay more for a property than the cost to acquire an equally desirable substitute property. Comparative sales in the same neighborhood serve as the most direct reflection of market value, providing insight into what buyers are willing to pay for similar parcels of land under similar conditions. By analyzing recent sales data of comparable properties, assessors can determine a value that reflects current market trends and localized factors that influence pricing.

Using comparative sales allows assessors to consider variables such as location, size, and any unique features that may affect value, leading to a more accurate assessment that aligns with the present real estate market rather than relying on outdated or unrelated sales data. This method is favored in real estate appraisals due to its reliance on real-world transactions, making it a robust approach for determining land value.