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) As excess land if it could be sold or developed
Why this is correct: Excess land is defined as a portion of a site that is not needed to support the existing improvement but can be separated and sold or developed independently. Its value is based on its own highest and best use. Why the other choices are wrong: 'As a site improvement fully depreciated already' is incorrect; excess land is land, not an improvement. 'As surplus land in every case without exception' is wrong; surplus land cannot be separately utilized, while excess land can. 'As having no bearing on the value conclusion' is false; excess land typically contributes incremental value. Exam tip: Key distinction: Excess land can be split off; surplus land cannot. The classification affects how it's valued.
Why This Is the Correct Answer
Why this is correct: Excess land is defined as a portion of a site that is not needed to support the existing improvement but can be separated and sold or developed independently. Its value is based on its own highest and best use. Why the other choices are wrong: 'As a site improvement fully depreciated already' is incorrect; excess land is land, not an improvement. 'As surplus land in every case without exception' is wrong; surplus land cannot be separately utilized, while excess land can. 'As having no bearing on the value conclusion' is false; excess land typically contributes incremental value. Exam tip: Key distinction: Excess land can be split off; surplus land cannot. The classification affects how it's valued.
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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