An appraiser is extracting site value from three improved sales in a subdivision. Sale 1 sold for $500,000, with improvements contributing $330,000. Sale 2 sold for $540,000, with improvements contributing $365,000. Sale 3 sold for $420,000 in a lender-forced foreclosure, with improvements contributing $330,000, and the appraiser finds no basis for adjusting it. The appraiser concludes to the mean of the usable sales. What is the indicated site value?
Correct Answer
D) $172,500
Sale 3 is a forced sale that cannot be adjusted, so it is excluded from the reliable data. Sale 1 indicates $170,000 and Sale 2 indicates $175,000, for a mean of $172,500. Including Sale 3's $90,000 pulls the mean down to $145,000. The $170,000 figure is the median of all three results, and $90,000 is Sale 3 alone.
Why This Is the Correct Answer
Option D is correct because Sale 3 is a forced sale with no supported adjustment, leaving Sale 1 at $500,000 − $330,000 = $170,000 and Sale 2 at $540,000 − $365,000 = $175,000. The mean of those two results is $172,500.
Why the Other Options Are Wrong
Option A: $90,000
Option A, $90,000, is $420,000 − $330,000, the result from the foreclosure sale alone. The appraiser has no basis for adjusting that sale; the mean of the arm's-length sales is $172,500.
Option B: $145,000
Option B, $145,000, is ($170,000 + $175,000 + $90,000) ÷ 3, which keeps the forced sale in the average. The mean of the two reliable results is $172,500.
Option C: $170,000
Option C, $170,000, is the median of all three results, which is not the appraiser's chosen measure and still counts the forced sale. The mean of the arm's-length results is ($170,000 + $175,000) ÷ 2 = $172,500.
Screen, Subtract, Then Summarize
Remove unreliable sales first, then extract land from each remaining sale, and only then average.
How to use: Use this order when several sales are offered and one has unusual sale conditions.
Exam Tip
Look for sale-condition facts before doing any arithmetic, and note whether a distorted sale can be adjusted.
Common Mistakes to Avoid
- -Averaging all available results without verifying sale conditions
- -Using the median of all sales when the conclusion rests on the mean of arm's-length sales
- -Treating the lowest extraction result as a conservative land value
Concept Deep Dive
Analysis
Each extraction is one subtraction, but the real skill is data screening. Conditions of sale affect how well a price reflects the market, and any distortion falls straight into the land remainder. Excluding the unadjustable forced sale comes before averaging.
Background Knowledge
Conditions of sale, such as whether a transaction was at arm's length or a foreclosure, are an element of comparison. A price affected by unusual conditions needs a supported adjustment or should be set aside. In extraction, the effect of such conditions falls on the land remainder.
Real-World Application
An appraiser pulls three recent house sales to test land values and learns during verification that one was a lender-forced sale. With no market basis to adjust it, the appraiser removes it and summarizes the other two.
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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Previous Question
The subject is a vacant site near a dairy farm or dairy processing plant. A comparable vacant site without this proximity sold for $830,000. Paired land sales indicate a discount of $170,000 for the proximity stigma, which makes the subject inferior to the comparable. No other adjustments apply. What is the indicated land value of the subject?
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An improved property has an indicated value of $2,050,000, and market data indicate a land allocation ratio of 22%. What is the indicated land value by allocation?