A vacant site being appraised adjoins a poultry processing plant. The best comparable, a vacant site not near a poultry operation, sold for $850,000. Paired land sales indicate a $180,000 discount for proximity to such a plant. No other adjustments are needed. What is the indicated value of the subject land?
Correct Answer
C) $670,000
Adjust the comparable toward the subject: $850,000 − $180,000 = $670,000. An inferior subject requires this downward adjustment to the comparable.
Why This Is the Correct Answer
Option C is correct because the comparable is superior to the subject, so its price is adjusted down: $850,000 − $180,000 = $670,000. Adjustments are made to the comparable, not the subject, and a paired-sales discount supports the amount.
Why the Other Options Are Wrong
Option A: $850,000
Option A, $850,000, is the comparable's unadjusted price. It ignores the supported $180,000 stigma discount; the adjusted indication is $850,000 − $180,000 = $670,000.
Option B: $1,030,000
Option B, $1,030,000, adds the discount ($850,000 + $180,000), adjusting in the wrong direction. Because the subject is inferior, the comparable is adjusted down: $850,000 − $180,000 = $670,000.
Option D: $490,000
Option D, $490,000, subtracts the discount twice: $850,000 − (2 × $180,000) = $490,000. Only one $180,000 adjustment applies, giving $670,000.
CBS: Comp Better, Subtract
If the comparable is better than the subject, subtract; if the comparable is inferior, add.
How to use: Use this whenever you must decide the direction of an adjustment to a comparable.
Exam Tip
Identify which property is superior before doing any arithmetic; a subject with a negative influence the comparable lacks means the comparable is adjusted down.
Common Mistakes to Avoid
- -Adding the adjustment because the subject is the one with the problem
- -Adjusting the subject instead of the comparable
- -Applying the same adjustment twice
Concept Deep Dive
Analysis
This question tests the direction of a sales comparison adjustment. Adjustments are made to the comparable to make it resemble the subject. Because the subject suffers poultry facility proximity stigma that the comparable lacks, the comparable's price is adjusted downward by the supported $180,000 discount.
Background Knowledge
In the sales comparison approach, adjustments are applied to the comparable's price to reflect how it differs from the subject. When the comparable is superior, its price is adjusted downward; when it is inferior, upward. Paired sales analysis is one way to support the amount of an adjustment such as external stigma.
Real-World Application
An appraiser values a vacant parcel next to a poultry processing plant. Her best comparable sold for $850,000 in an area without that influence, and paired land sales show a $180,000 discount for proximity, so she adjusts the comparable down to $670,000.
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 property sold for $315,000. The improvements had a replacement cost new of $240,000 and accrued depreciation of $90,000. What land value does extraction indicate?
Next Question
Two adjoining lots are worth $150,000 and $170,000 separately. Assembled, the site is worth $400,000, and assembly requires $20,000 of legal and demolition costs. What net plottage increment does the assemblage create?