A supported site value already reflects changed zoning, but improvement-level effects and as-improved use remain unresolved. What should the appraiser do?
Correct Answer
B) Analyze remaining improvement contribution and separately supported effects, avoiding overlap with site value.
A site estimate reflecting changed zoning does not prove that all improvement-level external loss has been counted. Reassess the improved use, conversion or removal costs and supported improvement contribution. Trace separately measured effects to prevent duplicate deductions.
Why This Is the Correct Answer
Option B is correct because a site value reflecting changed zoning does not show that every improvement-level effect has been counted. The appraiser should reassess the improvements' contribution under the new zoning, including any conversion or removal costs, and measure other supported effects separately. Tracing what the site value already reflects prevents deducting the same loss twice.
Why the Other Options Are Wrong
Option A: Deduct an unspecified whole-property loss from the improvements, then add back the zoned site value.
Option A deducts an unspecified whole-property loss from the improvements and then adds back the zoned site value. The site value already reflects its share of the zoning loss, so deducting the whole-property loss from improvements double counts that share, and the loss is not even measured.
Option C: Exclude improvement effects, since the site value already reflects the zoning.
Option C excludes improvement effects because the site value already reflects the zoning. The site value captures only the site's share; effects on the existing improvements and their use remain unresolved and still need analysis.
Option D: Subtract site value from improvement value and treat the difference as the external loss.
Option D subtracts site value from improvement value and calls the difference the external loss. That difference has no meaning as a measure of loss; external obsolescence must be measured with market evidence such as income loss or paired sales.
Count each loss once
If site value already carries part of a loss, deduct only the remaining improvement share from the building.
How to use: Use this check whenever an external influence affects both land and improvements in the cost approach.
Exam Tip
Watch for answers that either double count a loss or ignore part of it. The best answer usually calls for separate, supported analysis of what remains.
Common Mistakes to Avoid
- -Deducting a whole-property loss from improvements after using an adjusted site value
- -Assuming site value captures all effects on the improvements
- -Using arbitrary arithmetic instead of market evidence to measure loss
Concept Deep Dive
Analysis
This question tests avoiding double counting when a zoning change affects both site and improvements. The site value already reflects the zoning change, but effects on the improvements and their use are still unresolved. The appraiser needs to analyze those remaining effects separately without deducting again what the site value already captures.
Background Knowledge
The cost approach requires a separate estimate of site value, and a correctly estimated site value already reflects the portion of loss attributable to the site. Any remaining loss affecting the improvements is deducted as depreciation. Appraisers trace each measured effect to avoid deducting the same loss twice.
Real-World Application
A neighborhood is rezoned from commercial to residential, and land sales show the new site value. The appraiser then analyzes whether the existing retail building still contributes value under the new zoning, what conversion would cost, and deducts only improvement-level loss not already in site value.
More Cost Approach Questions
Why can equivalent-utility replacement cost be useful for an obsolete improvement?
An appraiser estimates the current replacement cost new of the improvements at $890,000, accrued depreciation from all causes at $170,000, and land value at $325,000. All necessary cost components and depreciation are included in those amounts. What is the indicated property value?
Improvement cost new is $595,000. Separately supported improvement depreciation deductions of $48,000, $27,000 are expressly nonoverlapping and not already excluded from cost new. Add supported site value of $155,000, already reflecting any site losses. What total indicated value results?
What best supports a claimed loss from a bathroom-layout deficiency?
Improvement cost new is $1,850,000. Separately supported improvement depreciation deductions of $310,000, $620,000 are expressly nonoverlapping and not already excluded from cost new. No site is included. What depreciated improvement amount results?
Which scenario most strongly supports giving the cost approach substantial weight?
A cost total $650,000 explicitly includes $40,000 of non-realty FF&E outside the appraised real-property interest. Exclude it. Supported realty-only total depreciation is $55,000. Add site $200,000, with no overlap. What real-property cost indication results?
A 2,200-sf dwelling costs $200 per square foot, and a separate 400-sf garage costs $75 per square foot. These costs are complete and do not overlap. Both have an effective age of 15 years and a total life of 50 years, with straight-line depreciation and no salvage value. No site value or other loss is involved. What is the combined depreciated cost of the dwelling and garage?
A new feature in the improvements has a current cost of $45,000 and a market contribution of $18,000. The entire difference is due to superadequacy, with no physical or external loss and no overlap. What is the loss from the superadequacy?
An external influence causes an annual net income loss of $9,600. The capitalization rate for the loss is 8%, and no other economic factors change. What is the indicated loss in value of the whole property, before allocation between site and improvements?
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