An appraiser is analyzing the $900,000 cash sale of a house. The improvements contribute $500,000. The sale also conveyed a separately marketable one-acre parcel of excess land, which vacant sales indicate is worth $120,000. What site value does the sale indicate for the primary homesite?
Correct Answer
A) $280,000
The price less the improvements leaves all the land in the sale: $900,000 − $500,000 = $400,000. Excess land is identified and appraised separately, so the primary site is $400,000 − $120,000 = $280,000. Stopping at $400,000 leaves the excess land in the primary site, adding it gives $520,000, and $500,000 is the improvement contribution rather than land.
Why This Is the Correct Answer
Option A is correct because the sale's total land remainder is $900,000 − $500,000 = $400,000, and that includes the separately marketable parcel. Removing its supported $120,000 value leaves $280,000 for the primary site.
Why the Other Options Are Wrong
Option B: $400,000
Option B, $400,000, is $900,000 − $500,000, which is the value of all land in the sale. It leaves the $120,000 excess parcel inside the primary-site figure; the primary site is $280,000.
Option C: $500,000
Option C, $500,000, is the improvement contribution, not a land figure. The primary site is $900,000 − $500,000 − $120,000 = $280,000.
Option D: $520,000
Option D, $520,000, is $900,000 − $500,000 + $120,000, which adds the excess land to a remainder that already contains it. The parcel should be subtracted, giving $280,000.
Remainder Means All Land
Price minus improvements gives all the land sold. Take out any separately valued parcel to isolate the primary site.
How to use: Use this reminder when an improved sale includes excess land.
Exam Tip
Read the final sentence closely. 'Primary homesite' and 'total land' lead to different answers from the same facts.
Common Mistakes to Avoid
- -Treating the whole land remainder as the primary-site value
- -Adding excess land to a remainder that already includes it
- -Confusing excess land, which can be sold separately, with surplus land, which cannot
Concept Deep Dive
Analysis
The extraction remainder is all the land conveyed, which here is more than the primary site. Because excess land is valued separately, it must be taken out when the remainder is used as primary-site evidence. The calculation has two subtractions, and the judgment lies in seeing the second one.
Background Knowledge
Excess land is land beyond what the existing improvement needs that is separately marketable and has its own utility and value. It should be identified and appraised separately. In extraction, its value sits within the land remainder until it is removed.
Real-World Application
A house sale includes an adjoining acre that could be sold on its own. To use the sale as evidence for a typical homesite, the appraiser extracts total land, then removes the acre's value based on vacant sales.
More Land/Site Questions
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Which fact, if supported by competitive-market evidence, most directly supports a unit-price premium for an otherwise comparable site?
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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?
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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?
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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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