A deep backyard that cannot be subdivided under local zoning is:
Correct Answer
B) Surplus land contributing at a declining rate
Why this is correct: Surplus land is land that is not needed to support the primary improvement but still contributes some value, typically at a lower rate per unit. A deep backyard that cannot be developed separately adds amenity value (e.g., privacy, recreation) but not development value. Why the other choices are wrong: 'Excess land requiring a separate valuation' describes land that could be sold or developed separately, which this cannot due to zoning. 'Valued at the same per-foot rate as the buildable area' would overstate value; surplus land contributes at a declining marginal rate. 'Deducted from the site area before valuation' is incorrect; it is included but valued differently. Exam tip: Excess land can be split off; surplus land cannot. Surplus land value diminishes per unit.
Why This Is the Correct Answer
Why this is correct: Surplus land is land that is not needed to support the primary improvement but still contributes some value, typically at a lower rate per unit. A deep backyard that cannot be developed separately adds amenity value (e.g., privacy, recreation) but not development value. Why the other choices are wrong: 'Excess land requiring a separate valuation' describes land that could be sold or developed separately, which this cannot due to zoning. 'Valued at the same per-foot rate as the buildable area' would overstate value; surplus land contributes at a declining marginal rate. 'Deducted from the site area before valuation' is incorrect; it is included but valued differently. Exam tip: Excess land can be split off; surplus land cannot. Surplus land value diminishes per unit.
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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