How is the value of excess land normally estimated?
Correct Answer
C) On its own highest and best use as a parcel
Why this is correct: Excess land is a portion of a site that is not needed to support the existing improvement but has its own development potential. It should be valued separately based on its own highest and best use as if it were a standalone parcel, using comparable land sales that are similar in size, shape, and utility to the excess portion. Why the other choices are wrong: 'As a proportion of the primary site's value' is wrong; excess land may have a different unit value. 'At the same unit rate as the primary site' is wrong; smaller parcels often have higher unit values. 'By deducting it from the total property value' is wrong; that describes surplus land, which is valued contributory to the primary use. Exam tip: Excess land = separate HBU, valued independently. Surplus land = supports primary use, valued contributory.
Why This Is the Correct Answer
Why this is correct: Excess land is a portion of a site that is not needed to support the existing improvement but has its own development potential. It should be valued separately based on its own highest and best use as if it were a standalone parcel, using comparable land sales that are similar in size, shape, and utility to the excess portion. Why the other choices are wrong: 'As a proportion of the primary site's value' is wrong; excess land may have a different unit value. 'At the same unit rate as the primary site' is wrong; smaller parcels often have higher unit values. 'By deducting it from the total property value' is wrong; that describes surplus land, which is valued contributory to the primary use. Exam tip: Excess land = separate HBU, valued independently. Surplus land = supports primary use, valued contributory.
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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Net operating income is $240,000 and the building, worth $1,500,000, is capitalized at 9 percent. Using a 7 percent land rate, what does the land residual technique indicate?
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Vacant lots in a subdivision sell for about $80,000 while finished homes there sell for about $400,000. Applying that relationship to a subject home that sold for $525,000, what site value does allocation indicate?