Mineral rights have been severed from a parcel and sold to a third party. What must the appraiser establish?
Correct Answer
C) Which rights are included in the assignment
Why this is correct: The first step in any appraisal is to identify the property rights being appraised. With severed mineral rights, the appraiser must determine whether the assignment is for the surface estate only, the mineral estate, or some other interest. Why the other choices are wrong: "The market value of the minerals in place" may be relevant but is secondary to defining the interest appraised. "Whether the surface owner may extract them" relates to legal rights but isn't the primary task. "The date on which the severance was recorded" is a factual detail, not the core analytical requirement. Exam tip: Always start by defining the property interest being valued. Severed rights create partial interests.
Why This Is the Correct Answer
Why this is correct: The first step in any appraisal is to identify the property rights being appraised. With severed mineral rights, the appraiser must determine whether the assignment is for the surface estate only, the mineral estate, or some other interest. Why the other choices are wrong: "The market value of the minerals in place" may be relevant but is secondary to defining the interest appraised. "Whether the surface owner may extract them" relates to legal rights but isn't the primary task. "The date on which the severance was recorded" is a factual detail, not the core analytical requirement. Exam tip: Always start by defining the property interest being valued. Severed rights create partial interests.
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What is the appraiser's obligation when a site's legal description does not match its apparent physical boundaries?
Why can the same physical parcel carry different values in two assignments?
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A land comparable sold 18 months ago in a market rising about 4 percent a year. What adjustment direction applies?
In a land residual analysis for a proposed office development, the appraiser estimates total annual net operating income (NOI) will be $1,250,000. The improvement value, derived via the cost approach, is $15,000,000. Market evidence indicates a 7.0% overall capitalization rate is appropriate for similar improved properties. What is the indicated land value?
A developer plans a 36-lot residential subdivision on raw land. Each lot is expected to sell for $85,000. Total development costs (excluding land) are $1,420,000, including $220,000 for entrepreneurial incentive. The developer requires a 12% annual yield on invested capital over a 3-year development period. Using the subdivision development method, what is the maximum price the developer should pay for the land if all lots sell at the projected price and timing?
In applying the land residual technique to a proposed subdivision, an appraiser estimates that the time required to fully absorb all lots will be 6 years. The developer requires a 10% annual yield on invested capital. Which discounting approach is most appropriate for converting future net proceeds to present value?
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