A property consists of a primary building site valued at $250,000 plus 0.75 acre of excess land. The excess land has a market value of $60,000 per acre, net of separation costs, and is not included in the primary-site value. What is the indicated total land value?
Correct Answer
C) $295,000
Excess contribution = 0.75 acre × $60,000/acre = $45,000; total = $250,000 + $45,000 = $295,000. The indicated value is $295,000. Common errors: leaving out the excess land gives $250,000; valuing the excess land as a full acre gives $310,000; reporting only the excess land gives $45,000.
Why This Is the Correct Answer
Option C is correct because the excess land contributes 0.75 × $60,000 = $45,000. Adding that to the primary site gives $250,000 + $45,000 = $295,000. Excess land that is separately marketable has its own value and is added to the primary site.
Why the Other Options Are Wrong
Option A: $45,000
Option A, $45,000, reports only the excess land contribution (0.75 × $60,000). The question asks for the total land value, which adds the $250,000 primary site for $295,000.
Option B: $250,000
Option B, $250,000, is the primary site alone and leaves out the excess land. Adding the $45,000 excess contribution gives $295,000.
Option D: $310,000
Option D, $310,000, values the excess as a full acre: $250,000 + $60,000. The excess is only 0.75 acre, contributing $45,000, for a total of $295,000.
Excess is extra, so add it
Excess land can stand on its own in the market, so value it at its own rate and add it to the main site.
How to use: Use this when a site is larger than the typical site and the extra area is separately usable.
Exam Tip
Multiply the exact fractional acreage by the rate, then remember to add the primary site value for the total.
Common Mistakes to Avoid
- -Treating surplus land as if it were separately marketable excess land
- -Reporting the excess contribution as the total land value
- -Rounding the excess area up to a full acre
Concept Deep Dive
Analysis
This question tests valuing excess land separately and adding it to the primary site value. The excess area is multiplied by its supported per-acre rate, then added to the primary site value. The excess is realizable net of separation costs and is not already counted in the primary site.
Background Knowledge
Excess land is land not needed to support the existing improvements that can be sold separately or support an independent use. Because it has its own utility and value, it is often valued separately and added. Surplus land, by contrast, cannot be sold separately or support an independent use and may add little value.
Real-World Application
An appraiser values a home on a lot with an extra three-quarter acre that zoning allows to be split off and sold. After confirming separation is feasible net of costs, the appraiser values the extra land at a supported per-acre rate and adds it to the typical site value.
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