Under which condition does the comparative sales approach provide the most reliable indication of vacant-land value?
Correct Answer
B) When enough reliable comparable vacant-land sales are available
Sales comparison is well supported when verified recent sales are sufficiently comparable in market, use, rights and physical characteristics and meaningful differences can be addressed. A nearby sale or assessor value alone does not guarantee reliability; select methods for the assignment and data.
Why This Is the Correct Answer
Option B is correct because the comparative sales approach produces the best indication of value when a sufficient number of recent sales of comparable properties exist. Verified sales similar in market, use, rights and physical characteristics let the appraiser measure and support differences from the subject.
Why the Other Options Are Wrong
Option A: When the assessor has already published a value for the land
Option A points to an assessor's published value for the land. An assessed value is not market sales evidence and does not make sales comparison reliable.
Option C: When the assessor’s land schedule is current for the area
Option C relies on a current assessor's land schedule for the area. A schedule is a mass appraisal tool, not a set of verified comparable sales, so it does not determine the reliability of sales comparison.
Option D: When the subject parcel is encumbered by a ground lease
Option D refers to a subject encumbered by a ground lease. A ground lease complicates the property rights being valued and is not a condition that makes vacant-land sales comparison more reliable.
Good comps, good comparison
Sales comparison is only as strong as the sales behind it: enough recent, verified, truly similar sales make it reliable.
How to use: Use this when asked what condition makes the sales comparison approach strongest.
Exam Tip
Choose answers tied to the quantity and quality of comparable sales rather than to assessor figures.
Common Mistakes to Avoid
- -Treating assessed values as market evidence
- -Relying on an assessor's land schedule in place of sales
- -Assuming any nearby sale is comparable without verification
Concept Deep Dive
Analysis
This question tests when sales comparison is most reliable for vacant land. The approach depends on market data, so its strength comes from an adequate number of reliable, comparable sales. Assessor figures and unrelated property conditions do not supply that evidence.
Background Knowledge
Sales comparison is generally the preferred method for valuing vacant land when good data exist. Its reliability depends on the quantity, recency and comparability of verified sales and on the support for adjustments.
Real-World Application
An appraiser valuing a residential lot in an active subdivision finds six verified lot sales in the past year. With plenty of reliable comparable data, the appraiser relies primarily on sales comparison for the land value.
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In an otherwise unchanged subdivision residual model, entrepreneurial incentive is a separate deduction from projected net sales proceeds. If that deduction increases and it is not already counted in the discount rate or another cost, what happens to indicated raw-land value?
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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?