A rectangular lot measures 150 feet by 200 feet. If similar lots are selling for $8.50 per square foot, what is the estimated value of this lot?
Correct Answer
A) $255,000
The lot area is 150 × 200 = 30,000 square feet. At $8.50 per square foot, the value is 30,000 × $8.50 = $255,000.
Why This Is the Correct Answer
Option A is correct because it follows the proper two-step calculation process. First, the area calculation: 150 feet × 200 feet = 30,000 square feet. Second, the value calculation: 30,000 square feet × $8.50 per square foot = $255,000. This methodology properly applies the sales comparison approach using a price per square foot unit of comparison from similar lot sales.
Why the Other Options Are Wrong
Option B: $2,975
Option B ($2,975) appears to result from a calculation error, possibly dividing instead of multiplying, or using incorrect dimensions. This amount is far too low for a 30,000 square foot lot at $8.50 per square foot.
Option C: $30,000
Option C ($30,000) represents only the square footage of the lot, not the dollar value. This suggests the test-taker calculated the area correctly but forgot to multiply by the price per square foot.
Option D: $127,500
Option D ($127,500) equals exactly half of the correct answer, suggesting a calculation error where either the area was calculated incorrectly (using only one dimension or halving the result) or the price per square foot was halved.
Area × Rate = Value (ARV Formula)
Remember ARV: Area × Rate = Value. Think 'A Really Valuable' calculation - always calculate the total area first, then multiply by the rate (price per unit).
How to use: When you see any land valuation problem with dimensions and a unit price, immediately think ARV: calculate Area first, identify the Rate (price per unit), then multiply for Value.
Exam Tip
Always double-check your area calculation by ensuring you're multiplying length × width, not adding them. Write out each step clearly: Step 1 - Calculate area, Step 2 - Multiply by unit price.
Common Mistakes to Avoid
- -Adding dimensions instead of multiplying them (150 + 200 = 350 instead of 150 × 200 = 30,000)
- -Forgetting to multiply the calculated area by the price per square foot
- -Confusing the area calculation result (30,000 sq ft) with the final dollar value
Concept Deep Dive
Analysis
This question tests the fundamental skill of calculating land value using the sales comparison approach with a price per square foot metric. The problem requires two sequential calculations: first determining the total area of the rectangular lot, then multiplying by the unit price to arrive at total value. This type of calculation is essential in real estate appraisal as land valuation often relies on comparable sales data expressed in price per unit measurements. The question demonstrates how appraisers use market data from similar properties to estimate value for the subject property.
Background Knowledge
Land valuation using the sales comparison approach requires understanding how to calculate areas of geometric shapes and apply unit pricing from comparable sales. Appraisers commonly express land values in terms of price per square foot, price per acre, or price per front foot depending on the property type and local market practices.
Real-World Application
Appraisers regularly use this method when valuing vacant land by analyzing recent sales of similar lots in the area. They collect data on comparable lot sales, calculate price per square foot for each, and apply an appropriate rate to the subject property based on similarity adjustments.