For a single-family home, what is the appropriate appraisal unit?
Correct Answer
B) Land and building together, the unit the market buys and sells
The proper unit to value is the one people in the market typically buy and sell. Single-family homes are sold as a combination of land and buildings, so that combination is the appraisal unit.
Why This Is the Correct Answer
Option B is correct because the proper unit to value is the one people in the market typically buy and sell. Single-family homes are bought and sold as land and building together, so that combination is the appraisal unit.
Why the Other Options Are Wrong
Option A: The land and the building, each valued and sold separately
Option A, valuing and selling the land and the building separately, is wrong because single-family homes are not normally traded that way. Splitting them would not match the unit the market actually buys and sells.
Option C: The building alone, since the land does not depreciate
Option C, the building alone because land does not depreciate, is wrong because a house is not typically sold without its land. The fact that land is not depreciated in the cost approach does not change the unit the market trades.
Option D: The land alone, since buildings are personal property
Option D, the land alone because buildings are personal property, is wrong because a permanently attached house is real property, not personal property. Valuing only the land would ignore the main improvement buyers are paying for.
Value what the market sells
The appraisal unit mirrors the market's typical transaction. Homes sell as house plus lot, so value them that way.
How to use: Use this when asked what unit or combination of components should be appraised.
Exam Tip
When a choice relies on a false premise such as buildings being personal property, eliminate it quickly. The best answer ties the unit to market behavior.
Common Mistakes to Avoid
- -Treating a house as personal property separate from the land
- -Confusing a cost-approach land estimate with the appraisal unit
- -Adding separate land and building values as if they were sold separately
Concept Deep Dive
Analysis
This question tests the concept of the appraisal unit: the property should be valued as the unit that the market typically buys and sells. For a single-family home, the market trades the land and the house together. Choices that split land from building, or mislabel buildings as personal property, do not reflect how the market transacts.
Background Knowledge
Appraisers identify the property to be valued, including the unit of comparison the market recognizes. Residential buyers purchase improved lots as a whole, so sales evidence reflects land and improvements together. Land may still be valued separately for certain analyses, such as the cost approach, but that is an analytical step, not the appraisal unit.
Real-World Application
An appraiser values a typical suburban home for a purchase loan. The comparable sales are all improved lots sold with their houses, so the appraiser values the property as a single unit of land and building. A separate site value appears only in the cost approach.
More Market Questions
In market area analysis, what characteristic distinguishes a district from a neighborhood?
Under USPAP Standards Rule 1-3(a), which item must an appraiser identify and analyze when necessary for credible results in a market value assignment?
How does the Fannie Mae Selling Guide define a neighborhood?
Several homes in a neighborhood are vacant and boarded up. Which market force does Fannie Mae classify this as?
Infrastructure investment such as a new interchange typically affects nearby land by:
A city raises property tax rates and tightens building regulations. Which market force does Fannie Mae classify these as?
An appraiser believes, without market evidence, that a nearby group home lowers values. What does Fannie Mae require?
Which three categories are used to report the supply of properties in a Fannie Mae neighborhood section?
An appraiser is asked for a retrospective value opinion as of three years ago. When must the appraiser meet the Competency Rule?
Can mixed land uses in a residential neighborhood ever enhance home values, according to Fannie Mae?
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