An improved comparable sold for a cash-equivalent $1,100,000. Market allocation evidence supports a typical land-to-total-price ratio of 22% for competitive properties (standard appraisal guidance allocation method). Separately, depreciated cost of the improvements (RCNLD) is estimated at $820,000 (standard appraisal guidance extraction method). Which pairing correctly contrasts the two land-value indications from these facts?
Correct Answer
D) Allocation $242,000; extraction $280,000.
Allocation gives $1,100,000 × 22% = $242,000. Extraction gives $1,100,000 − $820,000 = $280,000. The two methods use different evidence and need not coincide; reconcile reliability instead of forcing equality. The complete pair, rather than a truncated single method result, is the answer.
Why This Is the Correct Answer
Option D is correct because allocation gives $1,100,000 × 0.22 = $242,000 and extraction gives $1,100,000 − $820,000 = $280,000. The two methods rely on different evidence, so their results differ and are reconciled rather than forced to agree.
Why the Other Options Are Wrong
Option A: Allocation $280,000; extraction $242,000.
Option A, allocation $280,000 and extraction $242,000, has the right numbers under the wrong labels. Allocation is $1,100,000 × 0.22 = $242,000, and extraction is $1,100,000 − $820,000 = $280,000.
Option B: Allocation $858,000; extraction $820,000.
Option B, allocation $858,000 and extraction $820,000, reports the non-land amounts. $858,000 is the 78% building share ($1,100,000 × 0.78), and $820,000 is the improvement cost itself; the land indications are $242,000 and $280,000.
Option C: Allocation $242,000; extraction $1,920,000.
Option C, allocation $242,000 and extraction $1,920,000, has allocation right but adds the improvement cost in extraction: $1,100,000 + $820,000 = $1,920,000. Extraction subtracts it, giving $280,000.
Allocation multiplies, extraction subtracts
Allocation: price × land percent. Extraction: price − depreciated improvements.
How to use: Use this to match each figure with its method in comparison questions.
Exam Tip
Compute both figures yourself, then check that each is paired with the correct method label.
Common Mistakes to Avoid
- -Swapping the allocation and extraction results
- -Reporting the improvement amount instead of the land amount
- -Expecting the two methods to produce the same figure
Concept Deep Dive
Analysis
This question tests whether you can compute and correctly label two different land indications from the same sale. Allocation multiplies the price by the land ratio; extraction subtracts the depreciated improvement cost from the price. The two results need not match and must be paired with the right method.
Background Knowledge
Allocation and extraction are both used when vacant land sales are scarce. Allocation depends on a supported land-to-total ratio; extraction depends on a reliable estimate of depreciated improvement cost. Differences between them are reconciled based on the reliability of each.
Real-World Application
An appraiser in a built-up suburb uses a recent improved sale to test land value two ways: applying a market-supported land ratio and subtracting a depreciated cost estimate. She explains in the report why the two indications differ and which she gives more weight.
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