What does the formula for Value with the 65/35 Rule include?

The formula for Value according to the 65/35 Rule accurately reflects the principle that different attributes of value are weighted in a specific manner. This rule typically signifies that 65% of the value could be attributed to one component (often the improvements or functional factors associated with the property), while 35% could relate to another aspect (frequently the land value).

The formula includes the factors of Functional Factors (FF), which are measurements of how well the space meets the needs of its use, and Development Factors (DF), which consider the development potential and market dynamics. By multiplying these factors by the respective percentages (.65 or .35), it allows appraisers to derive a more nuanced understanding of the property's total value based on these weighted aspects.

This clear distinction and inclusion of percentages in the formula are crucial in real estate appraisal for accurately representing the contributions of land and improvements to the overall value. This approach supports the concept of how certain factors are more significant based on their relative utility or demand within the market context.