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
Land = $600,000 − $420,000 = $180,000; land percentage = $180,000/$600,000 × 100 = 30. The indicated result is 30 percent. Common errors: reporting the improvement share instead of the site share gives 70 percent; dividing the site value by the improvement contribution gives 43 percent; inverting the ratio (price ÷ site value) gives 333 percent.
Why This Is the Correct Answer
Option A is correct because site value is $600,000 − $420,000 = $180,000, and $180,000 ÷ $600,000 = 30 percent of total value.
Why the Other Options Are Wrong
Option B: 43 percent
Option B (43 percent) divides the site value by the improvement contribution: $180,000 ÷ $420,000. The share of total value uses the sale price as the denominator: $180,000 ÷ $600,000 = 30 percent.
Option C: 70 percent
Option C (70 percent) is the improvement share, $420,000 ÷ $600,000, not the site share. The site represents $180,000 ÷ $600,000 = 30 percent.
Option D: 333 percent
Option D (333 percent) inverts the ratio: $600,000 ÷ $180,000. A part cannot exceed 100 percent of the whole; the site share is $180,000 ÷ $600,000 = 30 percent.
Part over whole
A share is the part (site) divided by the whole (total sale price).
How to use: Use this whenever a question asks what proportion of value one component represents.
Exam Tip
Make sure the denominator is total value; any share above 100 percent is a sign the ratio is inverted.
Common Mistakes to Avoid
- -Reporting the improvement share instead of the site share
- -Dividing by the improvement value instead of total value
- -Inverting the ratio
Concept Deep Dive
Analysis
This question tests extracting land value and expressing it as a share of total value. First subtract the improvement contribution from the sale price to get the site value, then divide the site value by the sale price.
Background Knowledge
Extraction treats an improved sale as land plus the contributory value of improvements. The resulting land-to-total ratio can support allocation for similar properties. Ratios derived this way depend on reliable improvement contribution estimates.
Real-World Application
An appraiser studies several improved sales in a neighborhood, subtracting depreciated improvement values to find land shares near 30 percent. That evidence later supports an allocation ratio for a subject with no vacant land comparables.
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