An improved sale closed at $600,000 with improvements contributing $420,000. What proportion of value does the site represent?
Correct Answer
A) 30 percent of the total
Why this is correct: The site value is the total price minus the improvement contribution: 600,000 - 420,000 = 180,000. The site's proportion of total value is (180,000 / 600,000) * 100 = 30 percent. Why the other choices are wrong: '70 percent of the total' incorrectly uses the improvement contribution proportion. '42 percent of the total' is 420,000/600,000, which is the improvement proportion, not the site. '18 percent of the total' is not supported by any calculation with the given numbers. Exam tip: In allocation/extraction, site value = Sale Price - Improvement Value. Always double-check which component you're calculating the percentage for.
Why This Is the Correct Answer
Site value is the residual after the improvement contribution is removed: $600,000 minus $420,000 equals $180,000. Expressed against the total sale price, $180,000 divided by $600,000 equals 0.30, which is 30 percent of total value. The two component shares must sum to 100 percent, and 30 percent site plus 70 percent improvements confirms the arithmetic. Ratios like this one are what allocation applies to a subject property's known total value to estimate its site value.
Why the Other Options Are Wrong
Option B: 70 percent of the total
70 percent is the improvements' share, obtained by dividing $420,000 by $600,000. It is the complement of the correct answer and results from reporting the component the question did not ask about. Since site and improvement shares always sum to 100 percent, seeing your answer and 70 percent both in the list should prompt you to recheck which one the stem wants.
Option C: 42 percent of the total
42 percent comes from misplacing a decimal while dividing $420,000 by $600,000, which is actually 70 percent, not 42 percent. It resembles the improvement figure closely enough to look derived, but no combination of the given numbers produces it. It is a distractor built from the digits of the improvement contribution.
Option D: 18 percent of the total
18 percent borrows the digits of the $180,000 site value and presents them as a percentage without dividing by anything. The residual is a dollar amount, and turning it into a share requires dividing by the $600,000 total. The option rewards pattern matching on digits rather than completing the second step.
Residual First, Ratio Second
Subtract before you divide. The residual is the piece of the price nobody assigned to the building, and it is a dollar figure. Only after you have that dollar figure do you divide by the total to turn it into a percentage.
How to use: When a stem names a component and asks about its share, circle which component is wanted before calculating. Compute the residual in dollars, divide by the total, and then confirm your answer plus the given component's share equals 100 percent.
Exam Tip
Complement pairs are the signature of this question type. When two choices add to 100 percent, one of them is almost certainly the component you were not asked about.
Common Mistakes to Avoid
- -Reporting the improvement share when the question asks for the site share
- -Dividing the residual by the improvement contribution instead of by the total sale price
- -Applying a land-to-value ratio from a different property type or submarket
Concept Deep Dive
Analysis
This item asks for a land-to-value ratio, the figure that underlies the allocation technique of site valuation. Allocation rests on the observation that within a defined market and property type, land tends to represent a fairly stable proportion of total property value, so a ratio extracted from improved sales can be applied to the subject. To extract the ratio you first isolate the site value as the residual, then express it as a share of the whole. Here the improvements contribute $420,000 out of a $600,000 sale, so the site accounts for $600,000 less $420,000, or $180,000, and $180,000 divided by $600,000 is 0.30, or 30 percent. The trap is that the question asks about the site while the number handed to you describes the improvements, and the answer set rewards anyone who reports the complement by mistake.
Background Knowledge
You need to know that allocation estimates site value by applying a typical land-to-value ratio drawn from comparable improved sales, and that extraction derives site value as a residual from a specific sale. You should be able to move between dollar amounts and percentage shares and to recognize that site and improvement shares sum to the total. You also need to know that allocation is a secondary technique, most useful where vacant land sales are absent, and that ratios must come from properties of similar type, age, and location to be meaningful.
Real-World Application
Working in a built-out suburb with no vacant lot sales, the appraiser extracts land-to-value ratios from several recent improved sales of similar age and quality, finds a consistent band near 30 percent, and applies that band to the subject's indicated total value to estimate site value for the cost approach. The report discloses that the ratio was drawn from improved sales and explains why direct land comparison was not possible.
More Land/Site Questions
Under which condition is the land residual technique most applicable?
Why can the same physical parcel carry different values in two assignments?
In a built-up area where no vacant land has sold for years, which approach to site value is the usual fallback?
How is entrepreneurial profit treated in the subdivision development method?
A land comparable sold 18 months ago in a market rising about 4 percent a year. What adjustment direction applies?
Why does a developer's required profit rise for a longer subdivision project?
How does holding cost enter the valuation of land bought for future development?
Excess land is best described as land that has which characteristic?
Plottage value arises in which of the following situations?
Which of the following is an off-site improvement rather than a site improvement?
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