Extraction produces a negative land value on one sale in the sample. What does this signal?
Correct Answer
B) Recheck the improvement estimate, sale evidence and method applicability
A negative subtraction means the estimated improvement contribution exceeds the price used. Recheck sale terms, component consistency, depreciation, contamination or removal obligations and method applicability. It does not identify one proven error or establish that all land must have positive value.
Why This Is the Correct Answer
Option B is correct because a negative extraction result means the improvement estimate is larger than the price used, so the appraiser rechecks the improvement estimate, sale terms and evidence, depreciation, possible contamination or removal obligations and whether extraction suits that sale. The result signals a problem to investigate rather than identifying a specific proven error.
Why the Other Options Are Wrong
Option A: The market land value is proven to be zero
Option A is wrong because one negative extraction result does not prove market land value is zero. It points to an inconsistency in the inputs or method that needs review.
Option C: The recorded sale price for that transaction is wrong
Option C is wrong because a negative result does not prove the recorded sale price is wrong. The improvement estimate, depreciation, sale terms or other factors may be the source of the problem.
Option D: Extraction is prohibited for the entire property type in that market area
Option D is wrong because a negative result on one sale does not prohibit extraction for an entire property type in the market area. It calls for rechecking that sale and the method's fit.
Negative means recheck
A negative land value is a warning light: recheck the building estimate, the sale and the method before relying on it.
How to use: Use this whenever a calculation produces an illogical result in a land valuation question.
Exam Tip
Prefer answers that call for investigation over answers that declare a single proven cause from one odd result.
Common Mistakes to Avoid
- -Concluding land value is zero from one negative result
- -Assuming the recorded price must be wrong
- -Abandoning extraction for the whole market because of one sale
Concept Deep Dive
Analysis
This question tests how to interpret an illogical result from the extraction method. A negative land value means the estimated improvement contribution exceeded the price used, which signals that the inputs or the method's applicability should be reexamined.
Background Knowledge
In extraction, land value is found by deducting the contributory value of the improvements from the sale price. The method depends on a reliable estimate of the improvements' contribution, which is easiest when improvements contribute little. Illogical results call for reexamining data and assumptions.
Real-World Application
While extracting land values from rural sales, an appraiser gets a negative figure for one sale. Investigation reveals the house needed major repairs that the depreciation estimate had not reflected, so the improvement contribution was overstated relative to the price.
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?
People Also Study
Real Estate Market
13.6% of exam
Property Description
11.8% of exam
Sales Comparison Approach
16.4% of exam
Cost Approach
13.6% of exam
Income Approach
8.2% of exam
Previous Question
A ground lease requires net rent below market rent for its remaining term. Assume identical risk, discount rate, expenses and terminal proceeds when comparing it with otherwise equivalent unencumbered land at market rent. What follows for the landlord’s leased fee value?
Next Question
Reliable survey information shows a neighbor’s garage physically extending three feet across the subject boundary. What is that physical intrusion called?