In the subdivision development method, which cost category covers streets, drainage and utility mains?
Correct Answer
A) Direct costs of developing the raw land
Why this is correct: Direct costs include onsite physical improvements like streets, drainage, and utilities that convert raw land into buildable lots. They are distinct from indirect costs (e.g., permits, financing) and entrepreneurial profit. Why the other choices are wrong: "Indirect costs of carrying the investment" includes financing, taxes, and administrative costs, not physical improvements. "The entrepreneurial incentive to develop" is the developer's profit, not a physical cost. "Marketing costs incurred in selling lots" are typically indirect or selling costs, not direct development costs. Exam tip: Direct costs are 'hard' construction costs; indirect costs are 'soft' costs like fees and carrying charges.
Why This Is the Correct Answer
Why this is correct: Direct costs include onsite physical improvements like streets, drainage, and utilities that convert raw land into buildable lots. They are distinct from indirect costs (e.g., permits, financing) and entrepreneurial profit. Why the other choices are wrong: "Indirect costs of carrying the investment" includes financing, taxes, and administrative costs, not physical improvements. "The entrepreneurial incentive to develop" is the developer's profit, not a physical cost. "Marketing costs incurred in selling lots" are typically indirect or selling costs, not direct development costs. Exam tip: Direct costs are 'hard' construction costs; indirect costs are 'soft' costs like fees and carrying charges.
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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