Vacant lot sales are scarce in a market area, so an appraiser plans to use extraction. Four recent arm's-length cash sales of improved residential properties are available. Which sale would be the most reliable for this purpose?
Correct Answer
A) A large lot with a small older cottage of modest contributory value
Extraction is most reliable for properties with limited improvements, because little has to be estimated and subtracted. The cottage on a large lot leaves a sizable land remainder that a modest improvement estimate cannot distort much. The custom home, fourplex and townhouse each require subtracting a large improvement estimate, which leaves a land figure exposed to error in that estimate.
Why This Is the Correct Answer
Option A is correct because a small cottage of modest contributory value is the kind of limited improvement for which extraction works best. Only a small estimate is subtracted, and the large lot means most of the price is land, so an estimating error has relatively little effect on the result.
Why the Other Options Are Wrong
Option B: A modest lot with a large custom home and costly recent upgrades
Option B describes a large custom home with costly recent upgrades on a modest lot. Most of the price would be improvement value, and upgrades may not contribute their cost, so the land remainder would depend heavily on a difficult estimate.
Option C: A small lot with a fourplex covering most of the site
Option C describes a fourplex covering most of a small lot. The improvements are substantial and account for much of the price, so a small percentage error in their contribution would be a large error in the land remainder.
Option D: A narrow infill lot with a new three-story townhouse and high-end finishes
Option D describes a new three-story townhouse with high-end finishes on a narrow infill lot. Its contribution is large and may not match its cost, which is the opposite of the limited improvements that make extraction reliable.
Less Building, Better Extraction
The less there is to subtract, the less there is to get wrong. Limited improvements mean a stronger land remainder.
How to use: Use this phrase when asked which improved sale best suits extraction.
Exam Tip
When comparing sales for extraction, look at how much of the price the improvements represent rather than how impressive or recent the property is.
Common Mistakes to Avoid
- -Preferring the newest or most expensive sale as the best evidence of land
- -Forgetting that land in extraction is a remainder that absorbs estimating errors
- -Choosing a heavily improved sale because cost data for it is detailed
Concept Deep Dive
Analysis
No calculation is needed; the skill is judging data quality before the method is applied. Land in extraction is a remainder, so the issue is which sale needs the smallest and least uncertain improvement estimate. The sale with limited improvements fits that test.
Background Knowledge
Extraction estimates site value by subtracting the value contribution of the improvements from total property value. It is a variation of the allocation method and is most reliable for properties with limited improvements. The contribution is typically based on depreciated cost.
Real-World Application
On the edge of a town, an appraiser needs land evidence and finds no recent vacant sales. An older cottage on a large lot recently sold, and the appraiser uses it for extraction while treating sales of larger, newer houses as weaker evidence of land value.
More Land/Site Questions
How should an appraiser account for a site's access to public sewer compared with competing sites that require septic systems?
Which fact, if supported by competitive-market evidence, most directly supports a unit-price premium for an otherwise comparable site?
A rectangular site's frontage is doubled while its depth is halved, keeping area constant. What is the likely value effect in a retail district?
A downtown site's zoning height limit is reduced from six stories to three. Buyers in this market had been paying for six-story development potential. What effect on land value is most supportable?
A zoning change increases permitted density from four to eight units per acre. What is the likely effect on site value?
Using the allocation method, market evidence supports a typical land-to-total-property-value ratio of 28% for similar improved properties in the subject’s location. An improved comparable sold for $825,000. What land (site) contribution is indicated by applying that ratio?
An appraiser is valuing a vacant site near a landfill. A similar vacant site that is not affected by the landfill sold for $480,000. Paired land sales indicate that proximity to the landfill lowers site prices by $70,000. No other adjustments apply. What is the indicated value of the subject site?
An appraiser is extracting site value from a $600,000 cash sale. The seller's records show an original construction cost of $250,000 and a depreciated book value of $110,000. The appraiser estimates current replacement cost new at $400,000 and accrued depreciation from all causes at $100,000. What is the indicated site value?
Three parcels assembled under single ownership (standard appraisal guidance assemblage) support separate as-is values of $290,000, $340,000, and $250,000. After assemblage for a higher-utility use, the combined site is valued at $1,050,000. Assemblage costs (demolition, legal, holding, and related) total $55,000. What is the indicated net plottage (plottage increment after assemblage costs)?
A comparable commercial site with 65 front feet sold for a cash-equivalent price of $585,000. Per standard appraisal guidance, sale price per front foot is a vacant-land unit of comparison when frontage is a primary value determinant. The subject site has 72 front feet and is otherwise similar. What indicated land value does the front-foot unit support before other adjustments?
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Previous Question
Paired land sales show a discount of $110,000 for vacant sites near a ready-mix concrete plant. A comparable vacant site without this proximity sold for $625,000. The subject has this proximity, which makes it inferior to the comparable. No other adjustments apply. What is the indicated land value?
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