Two contiguous parcels used separately support market values of $200,000 and $300,000. Assembled under single ownership for a higher-utility use (standard appraisal guidance assemblage), the combined site supports a market value of $620,000. Cash assemblage/closing costs necessary to complete the combination total $30,000. What net incremental (plottage) value remains after those assemblage costs?
Correct Answer
A) $90,000
Separate total = $200,000 + $300,000 = $500,000; gross increment = $620,000 − $500,000 = $120,000; net increment = $120,000 − $30,000 = $90,000. The indicated result is $90,000. Common errors: not deducting the assemblage costs gives $120,000; deducting the costs from the assembled value instead of from the increment gives $590,000; adding the assemblage costs instead of deducting them gives $150,000.
Why This Is the Correct Answer
Option A is correct because the separate values total $200,000 + $300,000 = $500,000, the gross increment is $620,000 - $500,000 = $120,000, and the net increment is $120,000 - $30,000 = $90,000. The assemblage costs reduce the benefit of combining the parcels. The result is the net plottage value.
Why the Other Options Are Wrong
Option B: $120,000
Option B, $120,000, is the gross increment without deducting the assemblage costs: $620,000 - $500,000 = $120,000. Net plottage is $120,000 - $30,000 = $90,000.
Option C: $150,000
Option C, $150,000, adds the assemblage costs instead of deducting them: $620,000 - $500,000 + $30,000 = $150,000. Costs reduce the increment: $120,000 - $30,000 = $90,000.
Option D: $590,000
Option D, $590,000, deducts the costs from the assembled value instead of from the increment: $620,000 - $30,000 = $590,000. The net increment is $620,000 - $500,000 - $30,000 = $90,000.
Gross gain minus costs
Find the gross gain from combining, then subtract what it costs to combine.
How to use: Use this two-step order whenever assemblage costs are given.
Exam Tip
Compute the gross increment first, then subtract the costs; the answer is an increment, not a total value.
Common Mistakes to Avoid
- -Ignoring assemblage costs
- -Subtracting costs from the assembled value instead of the increment
- -Adding costs to the increment
Concept Deep Dive
Analysis
This question tests net plottage after assemblage costs. The gross increment is the assembled value minus the sum of the separate values. Deducting the costs needed to complete the combination gives the net incremental value.
Background Knowledge
Plottage is the increment of value from assembling sites under single ownership for greater utility. Assemblage involves costs such as closing and legal fees, which reduce the net benefit. A rational buyer weighs the increment against these costs.
Real-World Application
A developer acquires two neighboring parcels for a larger building. The appraiser measures the value increase from the combined site and then deducts closing and legal costs of assembling it to show the net benefit.
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