A 6-acre site is improved with a house that a 1-acre lot would serve, and the market permits splitting off the remaining 5 acres. Those acres are:
Correct Answer
C) Excess land, valued separately at its own highest and best use
Why this is correct: Those acres are excess land, valued separately at its own highest and best use. The test is separability: land that can be legally and physically subdivided and sold or developed independently from the main improvement is excess land. Why the other choices are wrong: Part of the overall site value with no separate treatment applies to land that supports the existing use but cannot be separated. Surplus land supports the existing use but is not needed; it may contribute at a diminishing rate, but here the land is separable. Excluded from the appraisal entirely is never correct; all land must be valued. Exam tip: 'Excess' land is separable and has its own HBU; 'surplus' land is not needed but is not separable.
Why This Is the Correct Answer
Why this is correct: Those acres are excess land, valued separately at its own highest and best use. The test is separability: land that can be legally and physically subdivided and sold or developed independently from the main improvement is excess land. Why the other choices are wrong: Part of the overall site value with no separate treatment applies to land that supports the existing use but cannot be separated. Surplus land supports the existing use but is not needed; it may contribute at a diminishing rate, but here the land is separable. Excluded from the appraisal entirely is never correct; all land must be valued. Exam tip: 'Excess' land is separable and has its own HBU; 'surplus' land is not needed but is not separable.
More land-or-site-valuation Questions
Under which condition is the land residual technique most applicable?
What is the appraiser's obligation when a site's legal description does not match its apparent physical boundaries?
Why can the same physical parcel carry different values in two assignments?
A site differs from land in that a site is best described as which of the following?
In a built-up area where no vacant land has sold for years, which approach to site value is the usual fallback?
How is entrepreneurial profit treated in the subdivision development method?
A land comparable sold 18 months ago in a market rising about 4 percent a year. What adjustment direction applies?
In a land residual analysis for a proposed office development, the appraiser estimates total annual net operating income (NOI) will be $1,250,000. The improvement value, derived via the cost approach, is $15,000,000. Market evidence indicates a 7.0% overall capitalization rate is appropriate for similar improved properties. What is the indicated land value?
A developer plans a 36-lot residential subdivision on raw land. Each lot is expected to sell for $85,000. Total development costs (excluding land) are $1,420,000, including $220,000 for entrepreneurial incentive. The developer requires a 12% annual yield on invested capital over a 3-year development period. Using the subdivision development method, what is the maximum price the developer should pay for the land if all lots sell at the projected price and timing?
In applying the land residual technique to a proposed subdivision, an appraiser estimates that the time required to fully absorb all lots will be 6 years. The developer requires a 10% annual yield on invested capital. Which discounting approach is most appropriate for converting future net proceeds to present value?
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