An appraiser values a property in transition by applying a commercial use to the land and a residential use to the existing house. Which principle does this violate?
Correct Answer
C) Consistent use
The principle of consistent use states that a property should be valued on the basis of a single use for the entire property; valuing land for one use and improvements for another is incorrect, especially for properties in transition.
Why This Is the Correct Answer
Option C is correct because the principle of consistent use states that a property should be valued on the basis of a single use for the entire property. Valuing the land as commercial while valuing the existing house as residential mixes two uses, which is incorrect, especially for properties in transition.
Why the Other Options Are Wrong
Option A: Anticipation
Option A, anticipation, holds that value reflects expected future benefits. It does not address valuing land and improvements under different uses.
Option B: Progression
Option B, progression, describes a lesser-quality property gaining value from being near better properties. It has nothing to do with mixing uses within one property.
Option D: Externalities
Option D, externalities, refers to outside influences on a property's value, positive or negative. The error here is internal: two different uses applied to one property.
One property, one use
Land and building must be valued as one team playing the same game, not two players in different sports.
How to use: Use this phrase when land and improvements are valued under different uses.
Exam Tip
Transitional neighborhoods with land valued for a new use and old improvements are a common setup for consistent-use questions.
Common Mistakes to Avoid
- -Adding residential improvement value to commercial land value
- -Confusing consistent use with conformity
- -Ignoring demolition cost when the improvements do not fit the land's use
Concept Deep Dive
Analysis
This question tests the principle of consistent use. A property must be valued on a single use for the whole property, so valuing land for one use and improvements for another is an error. That is the scenario described.
Background Knowledge
For a property in transition, if the land's highest and best use is commercial, the existing house is valued for its contribution to that commercial use, which may be little or even negative. Consistent use prevents overstating value by combining the best-case value of each component under different uses.
Real-World Application
An older house sits on a lot now zoned and demanded for commercial use. The appraiser values the land for commercial use and treats the house as contributing little, or as a cost to remove, rather than adding its full residential value.
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