In the cost approach for an improved residential lot with streets, utilities and grading in place, which land figure is the appraiser concerned with?
Correct Answer
B) Site value of the land as developed
When appraising most improved sites, the appraiser is concerned with site value rather than raw land value; the land value used in the cost approach is actually a site value.
Why This Is the Correct Answer
Option B is correct because when appraising most improved sites, the appraiser is concerned with site value, meaning the land as developed for use with on-site preparation and off-site improvements such as utilities. The land value used in the cost approach is a site value.
Why the Other Options Are Wrong
Option A: Raw land value before any development
Option A, raw land value before any development, omits the streets, utilities and grading already in place. The cost approach for an improved lot uses site value, which reflects that development.
Option C: Assessed land value from the tax roll
Option C, assessed land value from the tax roll, is set for tax purposes and may not reflect market value. The cost approach needs a market-based site value.
Option D: The lot’s original purchase price
Option D, the lot's original purchase price, is a historical figure that may not reflect current market conditions or later development. The cost approach uses current site value.
Ready to build means site
Raw land becomes a site once it is prepared and served for use.
How to use: Use this to pick site value over raw land value in cost approach questions.
Exam Tip
For a lot with utilities and access already in place, expect the cost approach to use site value.
Common Mistakes to Avoid
- -Using raw land value for a developed lot
- -Using assessed value as market site value
- -Using the historical purchase price of the lot
Concept Deep Dive
Analysis
This question tests the difference between raw land and site. Once streets, utilities and grading are in place, the land is ready for use and is a site. In the cost approach for most improved properties, the land figure is site value.
Background Knowledge
Raw land is land without improvements, while a site is land that has been improved so it is ready to be used for its intended purpose. Site improvements can include grading, utility connections and access. In the cost approach, site value is estimated separately and added to the depreciated cost of the buildings.
Real-World Application
An appraiser preparing a cost approach for a house in a finished subdivision uses recent sales of comparable finished lots, which already include streets and utility hookups, to estimate site value.
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?
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?
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Previous Question
Paired land sales show a discount of $170,000 for vacant sites near a cattle feedlot. A comparable vacant site without this proximity sold for $800,000. The subject has this proximity, which makes it inferior to the comparable. No other adjustments apply. What is the indicated land value?
Next Question
Verified sales of competitive downtown residential lots were negotiated and analyzed primarily by site area, with no material frontage or density differences. Which unit of comparison most directly reflects this market's practice?