The residual technique used by an appraiser reflects what type of values?

The residual technique in appraisal is a method used to estimate the value of a property by determining the value of its components, such as land and improvements, as well as the overall property value. This technique involves calculating the potential income that the property could generate and assessing the costs associated with improvements or construction.

By focusing on both known and unknown values, the residual technique allows appraisers to derive the value of the land by subtracting the costs of development (known values of improvements) from the total value of the property (which may include unknown values). This makes it particularly useful in situations where there are few comparable sales or when the property is unique.

The combination of evaluating both known and unknown values ensures a comprehensive understanding of the property’s worth, rather than limiting the analysis to only observable data. This multifaceted approach reflects the dynamic nature of real estate values and the importance of considering all relevant factors in determining an accurate appraisal.