A cash-equivalent vacant-site sale of $400,000 has 50 front feet. Market analysis supports applying its rate per front foot to an otherwise matched subject with 60 front feet. What land indication results?
Correct Answer
D) $480,000
Rate = $400,000/50 front feet = $8,000/front foot; subject = 60 × $8,000 = $480,000. The indicated value is $480,000. This is the result under the stated inputs, not a universal market ratio or an approval of a proposed development. Common errors: using the comparable price without adjusting for frontage gives $400,000; inverting the frontage ratio gives $333,333; measuring the 10-foot difference as a percentage of the subject's 60 feet instead of the comparable's 50 feet gives $400,000 × (1 + 10/60) = $466,667.
Why This Is the Correct Answer
Option D is correct because the rate is $400,000 / 50 front feet = $8,000 per front foot, and 60 × $8,000 = $480,000. This applies the market-supported front-foot rate to the subject's frontage. It is the result under the stated inputs.
Why the Other Options Are Wrong
Option A: $333,333
Option A, $333,333, inverts the frontage ratio: $400,000 / 60 × 50 = $333,333. The correct calculation is $400,000 / 50 × 60 = $480,000.
Option B: $400,000
Option B, $400,000, uses the comparable's price without adjusting for the subject's greater frontage. The correct figure is 60 × $8,000 = $480,000.
Option C: $466,667
Option C, $466,667, measures the 10-foot difference against the subject's 60 feet: 10 / 60 = 16.67%, and $400,000 × 1.1667 = $466,667. The comparable is the base, so the increase is 10 / 50 = 20%, giving $400,000 × 1.20 = $480,000.
Divide by comp, multiply by subject
Comp price divided by comp frontage gives the rate; rate times subject frontage gives the value.
How to use: Use this order to avoid inverting the ratio in any unit-of-comparison problem.
Exam Tip
If the subject has more units than the comparable, the indication should be higher than the comparable's price when the unit rate is held constant.
Common Mistakes to Avoid
- -Inverting the ratio of subject to comparable frontage
- -Using the comparable's total price without unit adjustment
- -Computing the percentage difference on the subject's frontage instead of the comparable's
Concept Deep Dive
Analysis
This question tests deriving and applying a price per front foot. Divide the comparable's price by its frontage to get the unit rate, then multiply by the subject's frontage. The market analysis in the stem supports using that rate for the subject.
Background Knowledge
Price per front foot is one of the recognized units of comparison for vacant land, along with price per square foot, per acre, per building site and per unit buildable. It is most meaningful where frontage drives value, such as in some commercial districts. The unit rate must be market supported for the subject.
Real-World Application
An appraiser valuing a commercial lot on a busy corridor finds that local buyers price sites by street frontage. After confirming that a recent sale is otherwise similar, the appraiser applies its rate per front foot to the subject's frontage.
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