A vacant site being appraised lies near a waste-to-energy incinerator. A comparable vacant site that is not near an incinerator recently sold for $650,000. Market data from paired land sales indicate a $125,000 discount for incinerator proximity. No other adjustments apply. What land value is indicated for the subject?
Correct Answer
D) $525,000
Adjust the comparable toward the subject: $650,000 − $125,000 = $525,000. An inferior subject requires this downward adjustment to the comparable.
Why This Is the Correct Answer
Option D is correct because the unaffected comparable sold for $650,000 and the supported stigma discount is $125,000. Since the subject is inferior, the comparable is adjusted downward: $650,000 − $125,000 = $525,000.
Why the Other Options Are Wrong
Option A: $650,000
Option A, $650,000, is the comparable's unadjusted price. It ignores the $125,000 stigma discount; the indication is $650,000 − $125,000 = $525,000.
Option B: $775,000
Option B, $775,000, adds the discount instead of subtracting it: $650,000 + $125,000 = $775,000. Because the comparable is superior, it is adjusted downward to $525,000.
Option C: $400,000
Option C, $400,000, subtracts the discount twice: $650,000 − $250,000 = $400,000. Only one $125,000 adjustment applies, giving $525,000.
Comp better, subtract
When the comparable has an advantage the subject lacks, remove that advantage's value from the comparable's price.
How to use: Use this to set the sign of a stigma or location adjustment.
Exam Tip
Adjustments go to the comparable; a comparable without a negative influence the subject has is adjusted down.
Common Mistakes to Avoid
- -Adding the discount because the subject has the stigma
- -Applying the adjustment twice
- -Using an unsupported stigma amount
Concept Deep Dive
Analysis
This question tests adjustment direction for an external stigma measured by paired sales. The comparable lacks the incinerator proximity stigma, so it is superior and must be adjusted downward. A single supported adjustment is applied to the comparable's price.
Background Knowledge
A negative external influence such as proximity to an incinerator can reduce land value. Paired sales of similar sites with and without the influence can measure the effect, which is then applied to adjust comparables toward the subject.
Real-World Application
An appraiser values a vacant residential lot near a waste-to-energy plant. Paired sales show lots near the plant sell for less than similar lots farther away, so the appraiser subtracts the measured discount from an unaffected comparable.
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?
People Also Study
Real Estate Market
13.6% of exam
Property Description
11.8% of exam
Sales Comparison Approach
16.4% of exam
Cost Approach
13.6% of exam
Income Approach
8.2% of exam
Previous Question
A 12-acre subdivision has 20% of its acreage reserved for roads and other nonlot uses. The density limit is four lots per net acre. Ignoring all other layout and approval constraints, what is the maximum whole number of lots allowed by this density calculation?
Next Question
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?