It likely wouldn't work with real estate, but low cost motorsports has a simple solution to this problem. If there is a $1000 limit on the value of the car before all the standard safety additions, then the owner has to accept $1000 from any other competitor for the car. This massively disincentives anyone from undervaluing their race car as it will simply be purchased for way less than it's worth. In real estate this would just result in wealthy people snapping up anything they thought was even slightly undervalued. Maybe value purchases can only happen when challenging a valuation with strong court-backed protection for the owner to ensure the valuation has been applied justly.
I'm not sure I agree with this, since construction costs are subject to a lot of government interventions that distort the market.
> The toughest part is making sure the process isn't corrupted
Exactly.
But much more land with improvements on it is also sold, and that's the land that all these hand-waving formulas claim to be determining the "value" of--not the total value of land + improvements, but just the value of the land itself.