A rectangular lot measures 150 feet wide by 200 feet deep. If similar lots in the area sell for $8.50 per square foot, what is the estimated value of this lot?
Correct Answer
B) $255,000
The lot area is 150 × 200 = 30,000 square feet. At $8.50 per square foot: 30,000 × $8.50 = $255,000.
Why This Is the Correct Answer
Option B is correct because it follows the proper two-step calculation process. First, calculate the total area: 150 feet × 200 feet = 30,000 square feet. Second, multiply the area by the price per square foot: 30,000 sq ft × $8.50/sq ft = $255,000. This straightforward mathematical approach properly applies the sales comparison method using unit pricing.
Why the Other Options Are Wrong
Option A: $225,000
This answer of $225,000 would result from using an incorrect price per square foot of approximately $7.50, or from miscalculating the total square footage of the lot.
Option C: $275,000
This answer of $275,000 suggests using an inflated price per square foot of approximately $9.17, or making an error in the area calculation that overstates the lot size.
Option D: $297,500
This answer of $297,500 indicates using an incorrect price per square foot of approximately $9.92, significantly overstating the unit value compared to the given market data.
Area × Rate = Value (ARV)
Remember ARV: Area × Rate = Value. Think 'ARV' like a recreational vehicle - you need to know the AREA of your campsite and the RATE per square foot to find the total VALUE you'll pay.
How to use: When you see a land valuation problem, immediately think ARV: calculate the Area first (length × width), identify the Rate (price per sq ft), then multiply for Value.
Exam Tip
Always double-check your area calculation by writing it out clearly (150 × 200 = 30,000), then carefully multiply by the given rate - use your calculator twice to verify the final multiplication.
Common Mistakes to Avoid
- -Forgetting to calculate total area first before applying the unit price
- -Mixing up length and width measurements or using incorrect dimensions
- -Making arithmetic errors in the final multiplication step
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 method. The appraiser must first determine the total area of the subject property by multiplying length times width, then apply the market-derived unit price to estimate total value. This is one of the most basic and commonly used valuation techniques for vacant land, requiring accurate area calculations and proper application of comparable sales data. The method assumes that similar lots in the area provide reliable market evidence for pricing.
Background Knowledge
Land valuation using price per square foot is a direct application of the sales comparison approach, where recent sales of similar properties provide unit pricing benchmarks. Appraisers must be proficient in area calculations and understand that this method works best when comparable properties are truly similar in size, location, and characteristics.
Real-World Application
Appraisers regularly use price per square foot analysis when valuing vacant lots, especially in subdivisions where multiple similar lots have sold recently, providing reliable unit pricing data for the sales comparison approach.
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