A subdivision of 90 lots has sold 6 lots per month since opening. An appraiser valuing the remaining 42 lots for a lender should be doing what kind of analysis?
Correct Answer
C) Absorption analysis of the sell-out period
Why this is correct: For a bulk sale of subdivision lots, the appraiser must analyze the absorption rate (lots sold per month) to estimate the sell-out period (42 lots ÷ 6/month = 7 months). This timeline is crucial for discounting future proceeds to present value. Why the other choices are wrong: Highest and best use is already established as residential lots. Feasibility rent analysis applies to income properties, not raw lots. Depreciation breakdown is for improvements, not typically for land. Exam tip: For subdivision lots, always perform absorption analysis.
Why This Is the Correct Answer
Why this is correct: For a bulk sale of subdivision lots, the appraiser must analyze the absorption rate (lots sold per month) to estimate the sell-out period (42 lots ÷ 6/month = 7 months). This timeline is crucial for discounting future proceeds to present value. Why the other choices are wrong: Highest and best use is already established as residential lots. Feasibility rent analysis applies to income properties, not raw lots. Depreciation breakdown is for improvements, not typically for land. Exam tip: For subdivision lots, always perform absorption analysis.
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