What does "Abstraction" refer to in property valuation?

Abstraction in property valuation specifically refers to the process of separating the value of land from the total value of the property, which includes any improvements made to the land, such as buildings or other structures. This concept is essential in appraisal practices because it allows appraisers to determine the intrinsic value of the land itself, independent of any structures. By doing so, appraisers can better understand how much value the land contributes versus how much the improvements contribute to the overall property value.

This practice is particularly useful in various valuation methods, such as the sales comparison approach or the cost approach, enabling a clearer analysis when estimating the value of a specific property. It underscores the importance of land value in the overall assessment process, allowing for more accurate and actionable insights into property values. Analyzing land value separately helps assessors account for differing conditions, zoning, and land potential, thereby providing a comprehensive evaluation for buyers, sellers, and investors.