The land residual technique is most appropriate in which of the following scenarios?

The land residual technique is particularly effective when the building is new and costs are known. This method involves separating the value of the land from the value of improvements on a property. By determining the costs associated with a new building and the potential income it can generate, appraisers can derive the land value.

In scenarios where the building is new, appraisers have access to up-to-date construction costs, current market rental rates, and other pertinent data that allow for an accurate calculation of the potential income the property could produce. This makes it easier to isolate the value of the land. The land residual technique is viable here because the known costs of the construction lend precision to the analysis, allowing appraisers to make informed assessments based on current, reliable data.

The effectiveness of this technique diminishes in scenarios where the land value is uncertain, improvements are inadequate, or no comparable properties are available. In those cases, finding a reliable method to evaluate the land separately from the improvements becomes significantly more difficult, leading to less accurate appraisals.