A buyer pays $280,000 for an improved property solely to obtain its site for redevelopment. Supported demolition and removal cost is $30,000, payable immediately. Ignoring all other costs, what is the buyer’s total acquisition-and-clearing cost for an equivalent cleared site?
Correct Answer
D) $310,000
Equivalent cleared-site cost = $280,000 paid for the teardown property + $30,000 demolition = $310,000. The indicated value is $310,000. This is the result under the stated inputs, not a universal market ratio or an approval of a proposed development. Common errors: leaving out the demolition cost gives $280,000; deducting the demolition cost instead of adding it gives $250,000; reporting only the demolition cost gives $30,000.
Why This Is the Correct Answer
Option D is correct because the equivalent cleared-site cost is $280,000 paid for the property plus $30,000 for demolition and removal, which equals $310,000. The buyer cannot use the site for redevelopment until the old improvements are removed, so the demolition cost is added to the price. The result reflects the total outlay for a cleared site under the stated inputs.
Why the Other Options Are Wrong
Option A: $30,000
Option A, $30,000, reports only the demolition cost and leaves out the $280,000 purchase price. The correct calculation is $280,000 + $30,000 = $310,000.
Option B: $250,000
Option B, $250,000, deducts the demolition cost instead of adding it: $280,000 − $30,000 = $250,000. Demolition is an extra cost the buyer must pay, so the correct total is $280,000 + $30,000 = $310,000.
Option C: $280,000
Option C, $280,000, leaves out the $30,000 demolition cost. The buyer still has to clear the site, so the correct total is $280,000 + $30,000 = $310,000.
Teardown: price plus clearing
To get a cleared site from a teardown, the buyer pays the price and then pays the wrecking crew. Both costs add together.
How to use: Use this whenever a buyer acquires an improved property only to remove the buildings.
Exam Tip
Ask whether a cost is something the buyer must pay in addition to the price; if so, add it to find the total acquisition cost.
Common Mistakes to Avoid
- -Subtracting demolition cost from the purchase price when finding the buyer's total cost
- -Ignoring demolition cost because the buildings have no value
Concept Deep Dive
Analysis
This question tests the cost a buyer bears to obtain a cleared site when buying an improved property only for its land. The buyer must pay the purchase price and then also pay to remove the improvements. The total cost of the cleared site is therefore the price plus demolition.
Background Knowledge
When improvements no longer contribute value and the highest and best use is redevelopment, a buyer effectively pays for land plus the cost of clearing it. Demolition and removal costs are part of the cost of obtaining a usable site. Any redevelopment use must also be financially feasible given market supply and demand.
Real-World Application
A builder buys an older house for $280,000 intending to demolish it and build new. Demolition and debris removal cost $30,000, so the builder's effective cost for a ready-to-build lot is $310,000, which the appraiser can compare with prices of vacant lots nearby.
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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