A comparable land sale was purchased by an adjoining owner completing an assemblage. How should the appraiser treat it?
Correct Answer
B) Consider whether the price included a plottage premium
Investigate the purchaser’s motivation and whether the price included a premium for combining parcels. Determine whether the subject has comparable assemblage potential and whether a supported adjustment is needed. An adjoining purchaser does not automatically make a sale unusable, nonmarket or subject to a fixed adjustment.
Why This Is the Correct Answer
Option B is correct because the appraiser should consider whether the price included a plottage premium paid for combining parcels. Plottage is an increment of value that results when sites are assembled under single ownership, producing greater utility. The appraiser then decides whether the subject shares that potential and whether a supported adjustment is needed.
Why the Other Options Are Wrong
Option A: Use it directly, as it is a recent arm's length sale
Option A, using the sale directly as a recent arm's length sale, is wrong because an adjoining owner may have paid more than a typical buyer to complete an assemblage. Using it without investigating that motivation could overstate value.
Option C: Exclude sales that involve an adjoining owner
Option C, excluding sales that involve an adjoining owner, is wrong because such a sale does not automatically become unusable. It may still be useful after the appraiser examines whether a premium was paid and adjusts if supported.
Option D: Adjust it upward to reflect the assemblage benefit
Option D, adjusting the sale upward to reflect the assemblage benefit, is wrong because any assemblage premium would already be in the price, so an upward adjustment moves in the wrong direction unless the subject has greater assemblage value. Any adjustment must be supported, not assumed.
Neighbor buyer? Check for plottage
When a neighbor buys to assemble, ask whether the price includes a plottage premium before using the sale.
How to use: Use this prompt whenever a comparable was bought by an adjoining owner.
Exam Tip
For sales with special buyer motivation, favor answers that call for investigation and supported adjustment over automatic use or exclusion.
Common Mistakes to Avoid
- -Treating an assemblage sale as a typical market sale without investigation
- -Discarding a sale simply because the buyer was an adjoining owner
Concept Deep Dive
Analysis
This question tests treatment of a comparable sale bought by an adjoining owner for assemblage. Such a buyer may pay a premium for the added utility of combining parcels, known as plottage. The appraiser should investigate motivation and whether a premium was paid, rather than accepting, rejecting or adjusting the sale mechanically.
Background Knowledge
Assemblage is the combining of two or more parcels under one ownership, and plottage is the added value that can result. Sales to adjoining owners can reflect special motivation. Appraisers verify buyer motivation and conditions of sale before relying on a comparable.
Real-World Application
A small lot sold for well above nearby prices to the owner of the shopping center next door, who wanted it for parking. The appraiser confirms the buyer's motivation and considers whether the price included a plottage premium that the subject, a lot without an adjoining buyer, would not command.
More Land/Site Questions
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Which fact, if supported by competitive-market evidence, most directly supports a unit-price premium for an otherwise comparable site?
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A downtown site's zoning height limit is reduced from six stories to three. Buyers in this market had been paying for six-story development potential. What effect on land value is most supportable?
A zoning change increases permitted density from four to eight units per acre. What is the likely effect on site value?
Using the allocation method, market evidence supports a typical land-to-total-property-value ratio of 28% for similar improved properties in the subject’s location. An improved comparable sold for $825,000. What land (site) contribution is indicated by applying that ratio?
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An appraiser is extracting site value from a $600,000 cash sale. The seller's records show an original construction cost of $250,000 and a depreciated book value of $110,000. The appraiser estimates current replacement cost new at $400,000 and accrued depreciation from all causes at $100,000. What is the indicated site value?
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