What is the appraiser's obligation when a site's legal description does not match its apparent physical boundaries?
Correct Answer
C) Disclose the discrepancy and state what was used
Why this is correct: Appraisers must disclose discrepancies in legal descriptions, state which area was used, and treat it as an extraordinary assumption if it could affect value, as resolving boundaries is outside their expertise. Why the other choices are wrong: "Adopt whichever description the client prefers" is unethical; the appraiser must exercise independent judgment. "Value the larger of the two areas described" is arbitrary and unsupported. "Complete a boundary survey before proceeding" is incorrect; appraisers are not surveyors. Exam tip: Disclose description discrepancies and state the basis used; don't resolve survey conflicts.
Why This Is the Correct Answer
Why this is correct: Appraisers must disclose discrepancies in legal descriptions, state which area was used, and treat it as an extraordinary assumption if it could affect value, as resolving boundaries is outside their expertise. Why the other choices are wrong: "Adopt whichever description the client prefers" is unethical; the appraiser must exercise independent judgment. "Value the larger of the two areas described" is arbitrary and unsupported. "Complete a boundary survey before proceeding" is incorrect; appraisers are not surveyors. Exam tip: Disclose description discrepancies and state the basis used; don't resolve survey conflicts.
More land-or-site-valuation Questions
Under which condition is the land residual technique most applicable?
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?
An appraiser is valuing undeveloped land intended for a 40-lot subdivision. Market data indicates strong demand, but the only nearby comparable subdivision sold out in 3 years with steady monthly absorption. The subject site is larger, topographically constrained, and lacks existing infrastructure. Which factor most critically affects the reliability of using the comparable’s absorption rate in the subject’s land residual analysis?
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