Two comparable sites differ only in that one has all utilities to the lot line. How should this be handled?
Correct Answer
A) Adjust for the cost the market attributes to extension
Why this is correct: The adjustment should reflect the market's reaction to the difference in utility availability. The market value difference is often less than the full engineering cost to extend utilities because buyers may discount the price by their expected cost, which can vary. The best evidence is paired sales analysis showing what buyers actually paid for serviced vs. unserviced lots. Why the other choices are wrong: 'Treat both as equal, since utilities can always be run' is wrong; cost and feasibility matter, so they are not equal. 'Exclude the unserviced site as not comparable at all' is wrong; it can be a comparable with adjustment. 'Adjust by the full construction cost of the extension' is wrong; the market adjustment may differ from cost. Exam tip: Adjust based on market evidence (paired sales), not just cost. Market value difference can be <= cost.
Why This Is the Correct Answer
Why this is correct: The adjustment should reflect the market's reaction to the difference in utility availability. The market value difference is often less than the full engineering cost to extend utilities because buyers may discount the price by their expected cost, which can vary. The best evidence is paired sales analysis showing what buyers actually paid for serviced vs. unserviced lots. Why the other choices are wrong: 'Treat both as equal, since utilities can always be run' is wrong; cost and feasibility matter, so they are not equal. 'Exclude the unserviced site as not comparable at all' is wrong; it can be a comparable with adjustment. 'Adjust by the full construction cost of the extension' is wrong; the market adjustment may differ from cost. Exam tip: Adjust based on market evidence (paired sales), not just cost. Market value difference can be <= cost.
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