A commercial site has more parking than its zoning requires and than the tenant uses. How should the extra area be considered?
Correct Answer
A) Investigate whether the unused land supports a separate lawful use or sale
Unused parking is a clue, not a complete classification. Determine whether land is actually unnecessary to support the existing use and whether independent legal, physical and economic use or sale is feasible. Such independence can support excess-land treatment; inseparable additional land may be surplus. Current tenant utilization alone does not settle the issue.
Why This Is the Correct Answer
Option A is correct because the appraiser must investigate whether the unused area is unnecessary to the current use and could be legally, physically and economically used or sold separately. Separately marketable land can be treated as excess land; land that cannot be separated may be surplus.
Why the Other Options Are Wrong
Option B: Treat it as a site improvement that has already been fully depreciated in value
Option B, treating the area as a fully depreciated site improvement, mischaracterizes it. The question concerns the land itself and whether it has separate utility, not the depreciation of paving.
Option C: Treat it as surplus land by default, without any investigation
Option C, treating it as surplus land by default without investigation, skips the needed analysis. The land might be separately marketable excess land, which has different valuation implications.
Option D: Disregard it, since it has no bearing on the value conclusion at all
Option D, disregarding the area as having no bearing on value, is wrong because land beyond the needs of the use can contribute value or be separately marketable.
Excess exits, surplus stays
Excess land can exit the parcel through separate sale or use. Surplus land stays with the property because it cannot stand on its own.
How to use: Use this phrase to sort extra land once you have tested whether it can be separated.
Exam Tip
Choose the answer that calls for analysis of separate use or sale. Answers that classify extra land by default skip a required step.
Common Mistakes to Avoid
- -Assuming unused parking is excess land without checking zoning
- -Ignoring extra land in the value conclusion
- -Confusing excess land with surplus land
Concept Deep Dive
Analysis
This question tests how an appraiser handles land beyond the needs of the current use. Extra parking is a clue, but classification depends on whether the land can support a separate lawful use or sale. Investigation, not assumption, determines whether it is excess land, surplus land, or needed for the existing use.
Background Knowledge
Excess land is not needed for the existing use and can be sold or developed separately, so it may be valued separately. Surplus land is not needed for the existing use but cannot support an independent use; it may still contribute some value to the whole. Current tenant usage alone does not settle the classification.
Real-World Application
An appraiser inspecting a retail center notes a large lightly used parking area at one corner. She checks zoning, access and parking requirements to see whether a pad site could be split off and sold.
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Previous Question
An improved comparable sold for a cash-equivalent $980,000. Market allocation evidence supports a typical land-to-total-price ratio of 26% for competitive properties (standard appraisal guidance allocation method). What indicated land (site) value results from applying that allocation ratio to the comparable’s sale price?
Next Question
Market extraction from recent improved sales supports a typical land-to-total-price allocation ratio of 23% for properties competitive with the subject. The subject’s improved fee-simple sale price (or reconciled improved value used as the allocation base) is $1,040,000. Per the allocation method (land = allocation ratio × total improved value), what land value is indicated?