An appraiser is valuing a vacant site of 18,400 square feet. Three recent sales of vacant parcels with a similar highest and best use are: Comp A, $800,000 for 16,000 square feet; Comp B, $945,000 for 18,000 square feet; Comp C, $1,100,000 for 20,000 square feet. No other adjustments are needed. Based on the mean of the three sales' prices per square foot, what is the indicated land value?
Correct Answer
D) $966,000
Unitize each sale first: $50, $52.50 and $55 per square foot. Their unweighted mean is $52.50 per square foot. Apply that stated method to 18,400 square feet: $52.50 × 18,400 = $966,000. Averaging total sale prices does not perform the requested unit comparison.
Why This Is the Correct Answer
Option D is correct because the unit prices are $800,000 ÷ 16,000 = $50.00, $945,000 ÷ 18,000 = $52.50 and $1,100,000 ÷ 20,000 = $55.00 per square foot. Their mean is $52.50, and $52.50 × 18,400 square feet = $966,000.
Why the Other Options Are Wrong
Option A: $948,333
Option A, $948,333, averages the total sale prices: ($800,000 + $945,000 + $1,100,000) ÷ 3. That ignores size differences; the mean unit price of $52.50 × 18,400 square feet gives $966,000.
Option B: $1,012,000
Option B, $1,012,000, applies only Comp C's $55.00 per square foot: $55.00 × 18,400. The question asks for the mean of all three unit prices, $52.50, which gives $966,000.
Option C: $920,000
Option C, $920,000, applies only Comp A's $50.00 per square foot: $50.00 × 18,400. The question asks for the mean of all three unit prices, $52.50, giving $966,000.
Unitize, average, apply
First turn each sale into a price per square foot, then average those rates, then multiply by the subject's size.
How to use: Use this three-step order for any mean unit price problem.
Exam Tip
If an answer equals the simple average of total prices, it skipped unitization. Check the order of operations.
Common Mistakes to Avoid
- -Averaging total sale prices
- -Using only one comparable's unit price
- -Applying the unit rate to the wrong area
Concept Deep Dive
Analysis
This question tests extracting unit prices from several comparables and applying their mean to the subject's area. Each sale must be unitized first, then the unit prices averaged, then the mean applied to the subject's square footage. Averaging total prices skips the size comparison.
Background Knowledge
Unitizing sales converts prices to a common basis such as price per square foot so parcels of different sizes can be compared. The mean of unit prices is one measure of central tendency. Appraisers still consider whether size or other differences warrant further adjustment.
Real-World Application
An appraiser valuing a commercial lot gathers three similar vacant sales of different sizes. She converts each to a price per square foot, reviews the range, and applies the mean to the subject's area.
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
An appraiser is valuing a vacant site near a wind farm. A comparable vacant site that is not near wind turbines sold for $575,000. Paired land sales indicate a $90,000 discount for wind farm proximity. No other adjustments apply. What is the indicated value of the subject site?
Next Question
Why must the proceeds in the subdivision development method be discounted to present value?