Dwelling 2,050 sf costs $178/sf. Separate detached garage cost $34,000 and separate site-improvement cost $21,500 are not counted in that rate. Land is excluded. What improvement cost new results?
Correct Answer
D) $420,400
2050×178+34000+21500 = 420400. Common errors: leaving out the site-improvement cost gives $398,900; leaving out the garage cost gives $386,400; reporting only the dwelling cost gives $364,900.
Why This Is the Correct Answer
Option D is correct because the dwelling cost is 2,050 sf x $178 = $364,900, and adding the garage cost of $34,000 and the site-improvement cost of $21,500 gives $420,400. Both separate items are stated to be outside the square-foot rate, so each must be added once to capture all improvement costs.
Why the Other Options Are Wrong
Option A: $364,900
Option A, $364,900, is only the dwelling cost (2,050 x $178). It leaves out both the $34,000 garage and the $21,500 site improvements; the full total is $364,900 + $34,000 + $21,500 = $420,400.
Option B: $386,400
Option B, $386,400, comes from 2,050 x $178 + $21,500, which leaves out the $34,000 garage cost. Adding the garage gives the correct $420,400.
Option C: $398,900
Option C, $398,900, comes from 2,050 x $178 + $34,000, which leaves out the $21,500 site-improvement cost. Adding it gives the correct $420,400.
Rate covers the house only
Think 'area times rate, then add the extras': anything the rate excludes, such as a detached garage or sitework, gets its own line.
How to use: Use this whenever a stem says certain costs are not counted in the per-square-foot rate.
Exam Tip
Read which items the unit rate excludes and add each excluded item once. Check whether land is in or out before adding anything for it.
Common Mistakes to Avoid
- -Stopping at area times rate and forgetting separately priced items
- -Adding only one of two excluded components
- -Adding land value when the question asks for improvement cost only
Concept Deep Dive
Analysis
This question tests whether you build a complete improvement cost new when some components are priced outside the square-foot rate. The dwelling rate covers only the dwelling, so the detached garage and site improvements must be added separately. Land is excluded, so nothing is added for it.
Background Knowledge
The square foot method applies one unit cost to the subject's area, but items not included in that rate must be costed and added separately. A complete cost new accounts for all direct and indirect costs of the improvements, while land is valued separately in the cost approach.
Real-World Application
An appraiser prices a ranch home from a cost service per-square-foot rate that covers only the living area. The detached garage and the driveway and landscaping are priced separately and added to reach total improvement cost new before depreciation.
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