Summation Method for Property Valuation: Land, Construction, and

School: Queensland University of Technology - Course: USB 142 - Subject: Accounting

Week 5- Summation Method Summation Approach -Estimated Value (V) = L + (C - D) + (O - D) -Where: oEstimated land value as if vacant and available to be developed to its most probable use (L)- look for vacant blocks of land in neighborhood oEstimated current cost of constructing the building either in replica or another of equal utility (C) oThe amount of depreciation that has occurred to the building(D) oEstimated cost, less depreciation of any other structures on the site e.g., Swimming pools, garage, fences, landscaping etc (O) Types of depreciation : Functional Physical Economic obsolescence Question 1 -V= $583,000 -O= $0 -(C-D)= 175x750= 131,250 -L= 583,000 - $131,250= $451,750 Question 2 -V= $470,000 -L= 190,000 -O= $220x35m2= $7,700 -O-D= $1220? -Main Improvements (C-D)= 272,300/ 155 sqm -Main Improvements 155 sqm @ $1757 AUD/sqm Question 3 -V= $475,000 -L= $220,000 -C= 320,000 -475,000- 220,000= 225,000 -C-D(main improvements) = 225,000 -O-D (ground improvements) 0 Percentage -D= 65k -C= 320,000

-D/C x 100= depreciation percentage