Thirty percent of a site lies within a regulated wetland. How should the appraiser treat that area?
Correct Answer
C) Value it separately at its restricted utility
Why this is correct: Wetland with development restrictions has a different utility and value than buildable land. It should be valued separately based on its restricted use (e.g., open space, conservation), reflecting its contribution to the whole property. Why the other choices are wrong: Valuing it at the same rate as buildable area ignores the legal restriction. Excluding it entirely from the site's total area is incorrect; it is still part of the site. Assuming a permit will be forthcoming would be an extraordinary assumption requiring disclosure, not a standard practice. Exam tip: Value land based on its legal, physical, and economic characteristics. Restricted land is valued at its contributory value in its restricted state.
Why This Is the Correct Answer
Why this is correct: Wetland with development restrictions has a different utility and value than buildable land. It should be valued separately based on its restricted use (e.g., open space, conservation), reflecting its contribution to the whole property. Why the other choices are wrong: Valuing it at the same rate as buildable area ignores the legal restriction. Excluding it entirely from the site's total area is incorrect; it is still part of the site. Assuming a permit will be forthcoming would be an extraordinary assumption requiring disclosure, not a standard practice. Exam tip: Value land based on its legal, physical, and economic characteristics. Restricted land is valued at its contributory value in its restricted state.
More land-or-site-valuation Questions
Under which condition is the land residual technique most applicable?
What is the appraiser's obligation when a site's legal description does not match its apparent physical boundaries?
Why can the same physical parcel carry different values in two assignments?
A site differs from land in that a site is best described as which of the following?
In a built-up area where no vacant land has sold for years, which approach to site value is the usual fallback?
How is entrepreneurial profit treated in the subdivision development method?
A land comparable sold 18 months ago in a market rising about 4 percent a year. What adjustment direction applies?
In a land residual analysis for a proposed office development, the appraiser estimates total annual net operating income (NOI) will be $1,250,000. The improvement value, derived via the cost approach, is $15,000,000. Market evidence indicates a 7.0% overall capitalization rate is appropriate for similar improved properties. What is the indicated land value?
A developer plans a 36-lot residential subdivision on raw land. Each lot is expected to sell for $85,000. Total development costs (excluding land) are $1,420,000, including $220,000 for entrepreneurial incentive. The developer requires a 12% annual yield on invested capital over a 3-year development period. Using the subdivision development method, what is the maximum price the developer should pay for the land if all lots sell at the projected price and timing?
In applying the land residual technique to a proposed subdivision, an appraiser estimates that the time required to fully absorb all lots will be 6 years. The developer requires a 10% annual yield on invested capital. Which discounting approach is most appropriate for converting future net proceeds to present value?
People Also Study
Valuation Principles & Procedures
25% of exam
Property Description & Analysis
20% of exam
Market Analysis & Highest/Best Use
15% of exam
Appraisal Math & Statistics
15% of exam
USPAP (Ethics & Standards)
15% of exam