In an additive valuation model, a whole property interest is $810,000 and the landlord's leased-fee component is $735,000. The tenant's component equals the difference, with no transaction costs or other effects. What does this model indicate for the tenant's component?
Correct Answer
A) $75,000
Complementary tenant amount=$810,000−$735,000=$75,000. Common errors: reporting the landlord component gives $735,000; reporting the whole interest gives $810,000; adding the components instead of subtracting gives $1,545,000.
Why This Is the Correct Answer
Option A is correct because under the stated model the tenant's complementary component is $810,000 - $735,000 = $75,000. The model expressly excludes transaction costs and other effects, so the difference is the tenant component.
Why the Other Options Are Wrong
Option B: $735,000
Option B, $735,000, is the landlord's leased-fee component, not the tenant's. The tenant component is the difference: $810,000 - $735,000 = $75,000.
Option C: $810,000
Option C, $810,000, is the whole property interest. Reporting it ignores the landlord's share; the tenant component is $810,000 - $735,000 = $75,000.
Option D: $1,545,000
Option D, $1,545,000, results from adding the components ($810,000 + $735,000) instead of subtracting. The correct tenant component is $810,000 - $735,000 = $75,000.
Landlord plus tenant equals whole
In this additive model, whole minus leased fee leaves leasehold, just as whole minus leasehold would leave leased fee.
How to use: Use this when a question gives the whole and one ownership component and asks for the other.
Exam Tip
Identify which component the question asks for before calculating, since the given figures are distractors if reported directly.
Common Mistakes to Avoid
- -Reporting the landlord's leased-fee value as the tenant's interest
- -Adding components instead of subtracting
- -Assuming real-market partial interests necessarily sum to fee simple value
Concept Deep Dive
Analysis
This question tests subtraction within a stated additive model of ownership components. You are given the whole interest and the landlord's leased-fee component, and the model says the tenant's component equals the difference.
Background Knowledge
A leased property involves a leased-fee interest held by the landlord and a leasehold interest held by the tenant. Some valuation models may treat them as summing to the whole, but separately appraised market values of partial interests do not necessarily add exactly to unencumbered value.
Real-World Application
An appraiser demonstrating an allocation for a client shows a whole interest of $810,000 and a leased-fee value of $735,000. Under the client's stated additive model, the appraiser reports the tenant's leasehold contribution as $75,000 and discloses that actual market values of partial interests may differ.
More Property Description Questions
A local zoning ordinance allows these maximum densities: R-1, 4 units per acre; R-2, 8 units per acre; R-4, 20 units per acre; PUD (with approval), 12 units per acre. Which category allows the highest density?
What design advantage is commonly associated with post-and-beam construction?
A hypothetical local ordinance permits either a single-family house or duplex on the site. The existing single-family house complies with all current rules. Which statement is supported?
A zoning variance allowing a reduced side setback is granted for a parcel. After the parcel is sold, who generally holds the benefit of the variance, subject to its conditions?
Under ANSI Z765-2021 as applied by Fannie Mae, a staircase runs from the second floor down to the first floor. Its area is counted as part of:
Under ANSI Z765-2021, as Fannie Mae requires for a detached house, where are exterior dimensions taken on a brick-veneer wall?
A building's HVAC system would be classified as which type of building component?
A home on a large tract is valued at $620,000 including the land it needs. The remaining excess land could be sold separately and contributes a net $95,000 after separation costs. What is the total indicated value?
A covered sale concerns a residence built in 1965. Which hazard is the subject of the federal pre 1978 housing disclosure rule, without assuming its actual presence?
Which site characteristic is most likely to reduce site utility by restricting where a typical dwelling can be placed?
People Also Study
Real Estate Market
13.6% of exam
Land or Site Valuation
4.5% of exam
Sales Comparison Approach
16.4% of exam
Cost Approach
13.6% of exam
Income Approach
8.2% of exam
Previous Question
Which observed combination most directly warrants investigation for possible wetland conditions, without itself establishing jurisdiction?
Next Question
A property's as-if-cured value is $916,000. Independent market analysis indicates a total value loss of $30,000 from its present repair condition, including all relevant cost, time and risk effects. The as-if-cured value does not reflect this loss, and no other deductions apply. What is the as-is value?