A comparable vacant townhouse site entitled to 8 dwelling units sold for $480,000, cash equivalent. The subject site is entitled to 6 dwelling units and is otherwise equivalent to the comparable. Using price per dwelling unit as the unit of comparison, what is the indicated land value?
Correct Answer
C) $360,000
The comparable indicates $480,000 ÷ 8 = $60,000 per entitled dwelling unit. Applying that supported rate to the subject’s six units gives $360,000. Entitlement count alone is not enough in an actual appraisal; utility, cost and market comparability must support the chosen unit.
Why This Is the Correct Answer
Option C is correct because the comparable indicates $480,000 / 8 = $60,000 per dwelling unit, and the subject's 6 units x $60,000 = $360,000. Price per units buildable is a recognized unit of comparison for vacant land. The subject is otherwise matched, so no other adjustment is needed.
Why the Other Options Are Wrong
Option A: $480,000
Option A, $480,000, is the comparable's total price for 8 units applied unchanged to a subject entitled to only 6. Converting to $60,000 per unit and multiplying by 6 gives $360,000.
Option B: $640,000
Option B, $640,000, results from inverting the ratio: $480,000 / 6 x 8 = $640,000. The rate must come from the comparable's own 8 units, $480,000 / 8 = $60,000, times the subject's 6 units, which is $360,000.
Option D: $60,000
Option D, $60,000, is the price per dwelling unit, not the subject's total land value. It still must be multiplied by the subject's 6 units: $60,000 x 6 = $360,000.
Divide by comp, multiply by subject
Unit rates come from the comparable's own count, and the subject's value comes from the subject's own count.
How to use: Use this for any unit-of-comparison problem, whether per unit, per acre or per square foot.
Exam Tip
When a per-unit rate appears among the choices, remember it is an intermediate step, not the final answer.
Common Mistakes to Avoid
- -Using the comparable's total price without unitizing
- -Dividing by the subject's unit count instead of the comparable's
- -Reporting the per-unit rate as the total value
Concept Deep Dive
Analysis
This question tests use of a price per dwelling unit as a land unit of comparison. Divide the comparable's price by its unit count to get a rate, then multiply by the subject's entitled units. The trap answers are the unadjusted price, an inverted ratio and the per-unit rate itself.
Background Knowledge
Vacant land is often compared using units such as price per square foot, per acre, per front foot, per site or per buildable unit. For townhouse land, price per entitled dwelling unit can best reflect how buyers price density, provided utility, cost and market evidence support it.
Real-World Application
An appraiser values a parcel approved for six townhouses. A nearby parcel approved for eight townhouses recently sold, so the appraiser converts that sale to a price per entitled unit and applies it to the subject.
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