How should excess land be valued within an appraisal of the whole property?
Correct Answer
C) Valued separately and added to the remainder
Why this is correct: Excess land is land not needed to serve or support the existing improvement and may have a separate highest and best use. It should be valued separately based on its own utility and marketability, then added to the value of the improved portion. Why the other choices are wrong: 'Blended into a single rate for the entire parcel' would incorrectly obscure the different value contributions. 'Disregarded, as it serves no existing improvement' is wrong; excess land has value. 'Valued at the same rate per foot as the main site' is incorrect because excess land often has a different unit value. Exam tip: Excess = separate HBU, value separately. Surplus = supports primary use, value as part of the site.
Why This Is the Correct Answer
Why this is correct: Excess land is land not needed to serve or support the existing improvement and may have a separate highest and best use. It should be valued separately based on its own utility and marketability, then added to the value of the improved portion. Why the other choices are wrong: 'Blended into a single rate for the entire parcel' would incorrectly obscure the different value contributions. 'Disregarded, as it serves no existing improvement' is wrong; excess land has value. 'Valued at the same rate per foot as the main site' is incorrect because excess land often has a different unit value. Exam tip: Excess = separate HBU, value separately. Surplus = supports primary use, value as part of the site.
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What is the appraiser's obligation when a site's legal description does not match its apparent physical boundaries?
Why can the same physical parcel carry different values in two assignments?
A site differs from land in that a site is best described as which of the following?
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?
In a land residual analysis for a proposed office development, the appraiser estimates total annual net operating income (NOI) will be $1,250,000. The improvement value, derived via the cost approach, is $15,000,000. Market evidence indicates a 7.0% overall capitalization rate is appropriate for similar improved properties. What is the indicated land value?
A developer plans a 36-lot residential subdivision on raw land. Each lot is expected to sell for $85,000. Total development costs (excluding land) are $1,420,000, including $220,000 for entrepreneurial incentive. The developer requires a 12% annual yield on invested capital over a 3-year development period. Using the subdivision development method, what is the maximum price the developer should pay for the land if all lots sell at the projected price and timing?
In applying the land residual technique to a proposed subdivision, an appraiser estimates that the time required to fully absorb all lots will be 6 years. The developer requires a 10% annual yield on invested capital. Which discounting approach is most appropriate for converting future net proceeds to present value?
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Previous Question
Two adjoining parcels are worth $200,000 and $150,000 separately. Combined they are worth $420,000. What is the plottage value?
Next Question
An appraiser is applying the land residual technique to value undeveloped land suitable for a 48-unit multifamily project. Total projected gross building income is $720,000 annually. Operating expenses (including replacement reserves) are 45% of effective gross income. The improvement's indicated value using the cost approach is $6,000,000, with a 6.5% overall capitalization rate applied to net operating income attributable to the improvements. What is the residual land value?