Two adjoining lots are worth $150,000 and $170,000 separately. Assembled, the site is worth $400,000, and assembly requires $20,000 of legal and demolition costs. What net plottage increment does the assemblage create?
Correct Answer
C) $60,000
Plottage is the added value from combining sites into one with greater utility. The gross increment is $400,000 − $320,000 = $80,000; after $20,000 of assembly costs, the net increment is $60,000.
Why This Is the Correct Answer
Option C is correct because the separate values total $150,000 + $170,000 = $320,000, so the gross increment is $400,000 − $320,000 = $80,000. Deducting the $20,000 of legal and demolition costs leaves a net plottage increment of $60,000.
Why the Other Options Are Wrong
Option A: $80,000
Option A, $80,000, is the gross increment ($400,000 − $320,000) with the $20,000 assembly costs ignored. The net increment is $80,000 − $20,000 = $60,000.
Option B: $100,000
Option B, $100,000, adds the assembly costs to the gross increment ($80,000 + $20,000) instead of subtracting them. The correct net figure is $80,000 − $20,000 = $60,000.
Option D: $40,000
Option D, $40,000, charges the $20,000 cost against each lot: $80,000 − (2 × $20,000) = $40,000. The assembly costs total $20,000 once, so the net increment is $60,000.
Gross gain, then pay costs
Find the whole-minus-parts gain first, then subtract the cost of putting the pieces together.
How to use: Use this when a plottage question includes assembly costs.
Exam Tip
Check whether the question asks for gross or net plottage; net figures deduct assembly costs once.
Common Mistakes to Avoid
- -Reporting the gross increment when net is asked
- -Adding assembly costs rather than deducting them
- -Deducting the assembly costs once per lot
Concept Deep Dive
Analysis
This question tests the calculation of net plottage. First find the gross increment by subtracting the sum of the separate lot values from the assembled value. Then deduct the costs needed to achieve the assembly to find the net increment.
Background Knowledge
Plottage is the added value created when two or more sites are combined under one ownership to produce a site with greater utility. Assemblage is the act of combining them. The net benefit of assembly depends on the costs required to achieve it.
Real-World Application
A builder buys two adjoining lots worth $150,000 and $170,000 separately and spends $20,000 on legal work and demolition to combine them. The assembled site is worth $400,000, leaving a net plottage gain of $60,000.
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