How should an appraiser account for a site's access to public sewer compared with competing sites that require septic systems?
Correct Answer
A) Analyze market reaction, total costs and feasible utility differences
Compare supported market reaction to service availability, connection and ongoing costs, capacity, maintenance and development constraints. Public sewer may improve utility, but the amount and even direction of its net value effect depend on the competitive market. Zoning permission alone does not prove equal utility.
Why This Is the Correct Answer
Option A is correct because the appraiser should analyze market reaction, total costs and feasible utility differences between sewer and septic sites. Public sewer may improve utility, but the amount, and even the direction, of the net value effect depends on the competitive market. Connection costs, ongoing costs, capacity and development constraints all bear on that effect.
Why the Other Options Are Wrong
Option B: Deduct the sewer connection fees dollar for dollar from the site’s value
Option B, deducting sewer connection fees dollar for dollar from site value, is wrong because cost does not equal value. The market may value sewer access more or less than the connection fee, and the fee is only one part of the comparison.
Option C: Assume equal value whenever either system is legal
Option C, assuming equal value whenever either system is legal, is wrong because legal permission alone does not prove equal utility. Buyers may react differently to sewer and septic because of costs, maintenance and development limits.
Option D: Ignore wastewater service in residential site valuation
Option D, ignoring wastewater service in residential site valuation, is wrong because utility availability affects how a site can be used and what buyers will pay. Wastewater service is a relevant site characteristic.
Market decides, not the fee
Utility differences are worth what the market says, which may differ from what the hookup costs.
How to use: Use this when a question asks how to value a difference in site utilities or features.
Exam Tip
Answers that call for market analysis of a feature generally beat answers that apply a cost dollar for dollar or ignore the feature.
Common Mistakes to Avoid
- -Equating the cost of a utility connection with its contribution to value
- -Assuming two sites are equal because both wastewater options are legal
Concept Deep Dive
Analysis
This question tests how to treat a difference in utility service between the subject and competing sites. The appraiser should measure how the market reacts to public sewer versus septic, considering costs, capacity and development constraints. The value effect is a market question, not a fixed formula.
Background Knowledge
Site utilities, including water and wastewater service, affect a site's utility and development potential. Their value effect is measured by market evidence, such as paired sales, rather than by cost alone. Septic systems can limit density or require suitable soils, while sewer service can involve fees and assessments.
Real-World Application
A lot on the edge of town can connect to public sewer, while nearby competing lots rely on septic. The appraiser studies sales of both types and considers connection fees, septic maintenance and lot-size limits to measure the market's reaction.
More Land/Site Questions
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?
An appraiser's value indication for a whole property is $2,450,000, and the depreciated contribution of all nonland improvements, including site improvements, is $1,180,000. What land value does the extraction method indicate?
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An improved property sold for $480,000. Current replacement cost new of its improvements is $360,000, with accrued depreciation of 25% of cost new. Using extraction and no other adjustments, what land value is indicated?