A depth table is used in site valuation for which purpose?
Correct Answer
D) Adjusting for lots deeper or shallower than typical
Why this is correct: A depth table is used in site valuation for adjusting for lots deeper or shallower than typical. It recognizes the principle of diminishing marginal utility: added depth contributes less value per foot than the frontage. The table provides factors or percentages to adjust the value of a standard-depth lot to reflect the value contribution of an atypical depth. Why the other choices are wrong: "Converting a lot's frontage into its total acreage" is a simple calculation, not the purpose of a depth table. "Setting the discount rate used for lot absorption" is unrelated to depth tables. "Establishing the ratio of site value to total value" describes the allocation method. Exam tip: Depth tables are a tool in the sales comparison approach to make adjustments for a key physical characteristic.
Why This Is the Correct Answer
Why this is correct: A depth table is used in site valuation for adjusting for lots deeper or shallower than typical. It recognizes the principle of diminishing marginal utility: added depth contributes less value per foot than the frontage. The table provides factors or percentages to adjust the value of a standard-depth lot to reflect the value contribution of an atypical depth. Why the other choices are wrong: "Converting a lot's frontage into its total acreage" is a simple calculation, not the purpose of a depth table. "Setting the discount rate used for lot absorption" is unrelated to depth tables. "Establishing the ratio of site value to total value" describes the allocation method. Exam tip: Depth tables are a tool in the sales comparison approach to make adjustments for a key physical characteristic.
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?