An improved comparable sold for a cash-equivalent $980,000. Market allocation evidence supports a typical land-to-total-price ratio of 26% for competitive properties (standard appraisal guidance allocation method). What indicated land (site) value results from applying that allocation ratio to the comparable’s sale price?
Correct Answer
A) $254,800
Apply the stated land proportion: $980,000 × 26% = $254,800. The complementary proportion indicates the non-land component. The allocation ratio must be supported for competitive properties; it is not a universal national percentage.
Why This Is the Correct Answer
Option A is correct because allocation applies the supported land ratio to total price: $980,000 × 0.26 = $254,800. That is the portion of value attributed to the site.
Why the Other Options Are Wrong
Option B: $980,000
Option B, $980,000, is the entire improved sale price. Only 26% is allocated to land, giving $254,800.
Option C: $725,200
Option C, $725,200, is the improvement share: $980,000 × 0.74. The land share is $980,000 × 0.26 = $254,800.
Option D: $25,480
Option D, $25,480, misplaces the decimal by using 2.6% instead of 26%: $980,000 × 0.026. The correct result is $980,000 × 0.26 = $254,800.
Allocate a share
Allocation slices total value into land and building shares. Multiply total value by the land share to get land value.
How to use: Use this when a question gives a land-to-total ratio and a total price.
Exam Tip
Check that the percentage is converted correctly to a decimal. Answers that are off by a factor of ten often come from a decimal slip.
Common Mistakes to Avoid
- -Using the building share as the land value
- -Misplacing the decimal in the percentage
- -Applying a ratio without local market support
Concept Deep Dive
Analysis
This question tests the allocation method of land valuation. You multiply the improved sale price by the market-supported land-to-total ratio. The distractors use the full price, the building share, or a misplaced decimal.
Background Knowledge
The allocation method assigns a portion of total property value to the site based on typical ratios in comparable properties. It is most reliable when the ratio is well supported in the local market. It is generally considered less reliable than direct sales comparison of vacant land.
Real-World Application
In a built-out subdivision with no vacant lot sales, an appraiser finds that land typically represents about a quarter of total value. She applies that supported ratio to an improved comparable's price to indicate site value.
More Land/Site Questions
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Which fact, if supported by competitive-market evidence, most directly supports a unit-price premium for an otherwise comparable site?
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