Agricultural land is being appraised where development pressure has begun to appear. What determines its value?
Correct Answer
D) Whichever use the market currently pays more for
Why this is correct: Market value is the most probable price. In a transitional market, buyers will pay based on the highest and best use, which may be the future development use if market evidence supports that expectation, even if the current use is agricultural. Why the other choices are wrong: 'The capitalized value of the crop yield alone' would undervalue the land if development potential exists. 'The assessed value under agricultural use' is for tax purposes and often does not reflect market value. 'The original purchase price plus improvements' is a cost basis, not an indicator of current market value. Exam tip: In transitional areas, analyze recent sales to determine whether the market is pricing the land for its current use or its development potential.
Why This Is the Correct Answer
Why this is correct: Market value is the most probable price. In a transitional market, buyers will pay based on the highest and best use, which may be the future development use if market evidence supports that expectation, even if the current use is agricultural. Why the other choices are wrong: 'The capitalized value of the crop yield alone' would undervalue the land if development potential exists. 'The assessed value under agricultural use' is for tax purposes and often does not reflect market value. 'The original purchase price plus improvements' is a cost basis, not an indicator of current market value. Exam tip: In transitional areas, analyze recent sales to determine whether the market is pricing the land for its current use or its development potential.
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