The principle of surplus productivity states that:
Correct Answer
A) Land takes the residual after other factors are paid
Surplus productivity assigns land the residual income after compensation for labor, capital and entrepreneurship in the specified production framework. That principle alone does not establish legal or physical feasibility or require reinvesting every excess receipt. Highest and best use requires further analysis.
Why This Is the Correct Answer
Surplus productivity assigns land the residual income after compensation for labor, capital and entrepreneurship in the specified production framework. That principle alone does not establish legal or physical feasibility or require reinvesting every excess receipt. Highest and best use requires further analysis.
More Income Approach Questions
Which stated cause of supported value loss is external?
Improvement cost new is $450,000. Separately supported improvement depreciation deductions of $45,000, $25,000, $15,000 are expressly nonoverlapping and not already excluded from cost new. Add supported site value of $125,000, already reflecting any site losses. What total indicated value results?
Which two depreciation categories may each be classified as curable or incurable by comparing the cost to remedy a deficiency with the value gained?
Improvement cost new is $800,000. Separately supported improvement depreciation deductions of $120,000, $80,000, $40,000 are expressly nonoverlapping and not already excluded from cost new. No site is included. What depreciated improvement amount results?
The principle of anticipation in real estate valuation states that:
Which highest-and-best-use criterion addresses whether a proposed use is allowed by zoning and applicable legal restrictions?
Three comparables produce adjusted indications of $312,000, $309,000 and $315,000, requiring gross adjustments of 9%, 14% and 22% respectively. Verification also establishes that the first sale is the closest competitive substitute and its adjustments are better supported than the other two. Which indication deserves the most weight on those facts?
When reconciling value indications from the three approaches to value, an appraiser should:
A property sold at a cash-equivalent price of $1,062,500. Its stabilized annual NOI is $85,000. What is the indicated overall rate?
In reconciliation, an appraiser should:
People Also Study
Real Estate Market
13.6% of exam
Property Description
11.8% of exam
Land or Site Valuation
4.5% of exam
Sales Comparison Approach
16.4% of exam
Cost Approach
13.6% of exam
Related Tools
Previous Question
A residential income property has annual potential gross rent of $120,000. Combined vacancy and collection loss is 5% of rent, and there is no other income. All annual property expenses, including real estate taxes and reserves but excluding debt service, total $45,000. What is the annual NOI?
Next Question
A comparable’s cash-equivalent price is $295,000. It requires current-dollar adjustments of +$6,000, −$8,000, +$3,000, and −$4,000, and no others. What is the adjusted price?