In a market where land represents 25 percent of value, a property sold for $480,000. What does allocation indicate for the site?
Correct Answer
D) $120,000
Apply the stated land proportion: $480,000 × 25% = $120,000. 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 D is correct because allocation applies the land share to the sale price: $480,000 × 0.25 = $120,000. That is the indicated site value.
Why the Other Options Are Wrong
Option A: $480,000
Option A, $480,000, is the full sale price, which includes the improvements. Land is 25% of it, or $120,000.
Option B: $360,000
Option B, $360,000, is the improvement share: $480,000 × 0.75. The land share is $480,000 × 0.25 = $120,000.
Option C: $12,000
Option C, $12,000, uses 2.5% instead of 25%: $480,000 × 0.025. The correct site value is $480,000 × 0.25 = $120,000.
Quarter for the land
If land is 25 percent, take a quarter of the price. The other three quarters are the improvements.
How to use: Use simple fractions like a quarter to check allocation answers quickly.
Exam Tip
Estimate the answer mentally first; a quarter of $480,000 is easy to check against the options.
Common Mistakes to Avoid
- -Choosing the building share
- -Misplacing the decimal
- -Treating the full price as site value
Concept Deep Dive
Analysis
This question tests a basic allocation calculation. Land represents 25 percent of value, so you multiply the sale price by 0.25. Distractors include the full price, the building share, and a decimal error.
Background Knowledge
The allocation method relies on a typical relationship between land value and total value in a market. It is a useful check when vacant land sales are limited. Its reliability depends on how consistent that relationship is among comparable properties.
Real-World Application
An appraiser in a fully developed suburb uses a supported 25% land ratio as one indication of site value for a home appraisal. She compares it with any available lot sales.
More Land/Site Questions
How should an appraiser account for a site's access to public sewer compared with competing sites that require septic systems?
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?
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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?
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Previous Question
Market extraction from recent improved sales supports a typical land-to-total-price allocation ratio of 23% for properties competitive with the subject. The subject’s improved fee-simple sale price (or reconciled improved value used as the allocation base) is $1,040,000. Per the allocation method (land = allocation ratio × total improved value), what land value is indicated?
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