What is "Allocation" in the context of property appraisal?

In the context of property appraisal, "Allocation" refers specifically to the process of determining average values for land and property based on recent sales data. This involves breaking down the total sale price of a property into its components, which typically includes estimates for both the land and the improvements made on it (such as buildings or structures). By examining comparable sales, appraisers can ascertain how much value is attributed to the land versus the improvements, facilitating a more accurate assessment of the property's worth.

This approach is crucial for establishing a fair market value and is commonly utilized in both residential and commercial property valuations. For instance, if several properties with similar characteristics have sold for various amounts, the appraiser can analyze these transactions to divide the values realistically among land and improvements, thereby enhancing the appraisal's accuracy.