A site measures 150 feet by 200 feet. If comparable sites in the area sell for $8.50 per square foot, what is the estimated value of this site?
Correct Answer
B) $255,000
Why this is correct: Calculate the site area: 150 ft × 200 ft = 30,000 sq ft. Multiply area by price per square foot: 30,000 × $8.50 = $255,000. Why the other choices are wrong: "$340,000" is wrong, possibly from misapplying perimeter or using 170 ft. "$297,500" is wrong, possibly from using 150 × 200 × $8.50 but with an arithmetic error. "$212,500" is wrong, possibly from using 150 × 200 × $7.08. Exam tip: For rectangular sites, always multiply length by width to get area before applying the unit price.
Why This Is the Correct Answer
Option B correctly applies the two-step calculation process. First, the total area is calculated: 150 feet × 200 feet = 30,000 square feet. Then the market value is determined by multiplying the area by the unit price: 30,000 square feet × $8.50 per square foot = $255,000. This straightforward multiplication demonstrates proper application of the sales comparison approach using unit pricing.
Why the Other Options Are Wrong
Option A: $340,000
This answer of $340,000 indicates a significant calculation error, possibly using a price per square foot of approximately $11.33 instead of the given $8.50, or fundamental errors in area calculation.
Option C: $297,500
This answer of $297,500 suggests a calculation error, possibly using an inflated price per square foot of approximately $9.92 instead of the given $8.50, or adding an incorrect adjustment factor.
Option D: $212,500
This answer of $212,500 appears to result from a calculation error, possibly using an incorrect price per square foot of approximately $7.08 instead of the given $8.50, or miscalculating the total square footage.
Area × Rate = Value (ARV)
Remember 'ARV' - Area × Rate = Value. Always calculate the total area first (length × width), then multiply by the unit rate. Think 'Area Really Valuable' to remember the sequence.
How to use: When you see a land valuation question with dimensions and price per unit, immediately think 'ARV': calculate Area first, identify the Rate given, then multiply for Value.
Exam Tip
Double-check your area calculation by ensuring you're multiplying length × width correctly, and verify your final multiplication by estimating (30,000 × $8.50 is close to 30,000 × $9 = $270,000).
Common Mistakes to Avoid
- -Forgetting to calculate total square footage first
- -Using wrong unit price or misreading the given rate
- -Making arithmetic errors in multiplication
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 site by multiplying length times width, then apply the market-derived unit price from comparable sales. This is one of the most basic and frequently used calculations in real estate appraisal, particularly for vacant land valuation. The method assumes that comparable sites are truly similar in terms of location, zoning, utilities, and other value-influencing characteristics.
Background Knowledge
Land valuation using the sales comparison approach requires understanding of unit pricing methods, where comparable sales are analyzed to derive a price per square foot, acre, or front foot. The appraiser must ensure comparables are truly similar and make appropriate adjustments for differences in location, size, shape, topography, and other factors that affect value.
Real-World Application
Appraisers regularly use this method when valuing vacant lots for residential development, commercial sites, or industrial land where comparable sales data is available and sites are reasonably similar in characteristics.
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