Land is partway through being developed into a residential subdivision. As of the effective date, it should be valued according to what?
Correct Answer
D) Its stage of physical development at the valuation date
The stage of production indicates a property’s stage of physical development at a specific time; land converted into residential sites passes through stages, and the property must be valued according to its stage of production.
Why This Is the Correct Answer
Option D is correct because a property must be valued according to its physical stage of production as of the valuation date. Partly developed subdivision land is neither raw land nor finished homes, so the relevant market data is for land at that stage of development.
Why the Other Options Are Wrong
Option A: The finished retail price of the homes to be built
Option A, the finished retail price of the homes to be built, is wrong because the homes do not yet exist; using that price would value a future stage the property has not reached.
Option B: The original raw land purchase price
Option B, the original raw land purchase price, is wrong because the property has moved past the raw land stage, and a historical purchase price does not measure current value.
Option C: The average value of all lots in the county
Option C, the average value of all lots in the county, is wrong because a countywide average ignores the property's own location, characteristics and stage of development.
Value what exists today
Value the land at the stage it has physically reached on the effective date, not where it started or where it will end.
How to use: Use this check when a question involves land partway through development.
Exam Tip
When a property is mid-development, choose the answer tied to its current stage of production rather than past cost or future finished value.
Common Mistakes to Avoid
- -Valuing partly developed land at finished-home prices
- -Relying on the original purchase price as current value
- -Using comparables from a different stage of production
Concept Deep Dive
Analysis
This question tests the stage-of-production concept. Land being converted into residential sites passes through stages, and the property must be valued at the stage it has actually reached on the effective date. That stage governs which level of market data is relevant.
Background Knowledge
Once the unit to be appraised is defined, its stage of production determines what level of market data is relevant. Subdivision land can be valued as raw acreage, as land partly through development or as finished lots, and each stage calls for different comparable data and analysis.
Real-World Application
An appraiser values a subdivision where streets are graded but utilities are not yet installed. The appraiser looks for sales of land at a similar stage of development rather than sales of finished lots or completed homes.
More Market Questions
In market area analysis, what characteristic distinguishes a district from a neighborhood?
Under USPAP Standards Rule 1-3(a), which item must an appraiser identify and analyze when necessary for credible results in a market value assignment?
How does the Fannie Mae Selling Guide define a neighborhood?
Several homes in a neighborhood are vacant and boarded up. Which market force does Fannie Mae classify this as?
Infrastructure investment such as a new interchange typically affects nearby land by:
A city raises property tax rates and tightens building regulations. Which market force does Fannie Mae classify these as?
An appraiser believes, without market evidence, that a nearby group home lowers values. What does Fannie Mae require?
Which three categories are used to report the supply of properties in a Fannie Mae neighborhood section?
An appraiser is asked for a retrospective value opinion as of three years ago. When must the appraiser meet the Competency Rule?
Can mixed land uses in a residential neighborhood ever enhance home values, according to Fannie Mae?
People Also Study
Property Description
11.8% of exam
Land or Site Valuation
4.5% of exam
Sales Comparison Approach
16.4% of exam
Cost Approach
13.6% of exam
Income Approach
8.2% of exam
Previous Question
A city adopts a zoning ordinance and building codes that limit how parcels may be developed. Which government power is it exercising?
Next Question
For a matched comparable, a supported simple additive market trend is+1% per month over the five months from contract to effective date. What adjustment is omitted if no market-conditions adjustment is made? Express it as a percentage of the unadjusted comparable price.