Which fact, if supported by competitive-market evidence, most directly supports a unit-price premium for an otherwise comparable site?
Correct Answer
A) Buyers pay more for its usable location and configuration
A unit-price premium is supported when competitive-market evidence shows buyers pay more for a parcel's usable location and configuration. Larger size ordinarily lowers price per unit, an irregular shape usually reduces usable area, and an access easement crossing the site burdens it, so none of these would by itself support a premium.
Why This Is the Correct Answer
Option A is correct because competitive-market evidence that buyers pay more for a parcel's usable location and configuration directly supports a higher unit price. The premium is tied to observed buyer behavior for a value-enhancing characteristic.
Why the Other Options Are Wrong
Option B: The parcel is larger in area than the competing sites
Option B points to the parcel being larger in area than competing sites. Larger parcels ordinarily sell for less per unit, so greater size by itself does not support a unit-price premium.
Option C: The parcel is irregular in shape compared with the others
Option C points to an irregular shape compared with the others. Irregular shape usually reduces usable area and utility, which tends to lower rather than raise unit price.
Option D: The parcel is crossed by an access easement to the rear lot
Option D points to an access easement crossing the parcel to the rear lot. An easement burdens the site and can limit its use, so it does not by itself support a premium.
Premiums follow buyer preference
A unit premium needs a feature buyers pay more for; bigger, odder or burdened usually costs per unit.
How to use: Use this to sort site features into likely premiums and likely discounts.
Exam Tip
Look for the option tied to market evidence of buyer preference rather than a physical difference that typically lowers unit price.
Common Mistakes to Avoid
- -Assuming a larger parcel deserves a higher price per unit
- -Treating an easement as a value-enhancing feature
- -Ignoring the effect of irregular shape on usable area
Concept Deep Dive
Analysis
This question tests which site characteristic supports a higher price per unit. A premium per unit should come from market evidence that buyers pay more for a feature. Superior usable location and configuration is such a feature, while larger size, irregular shape and easements tend to lower unit price.
Background Knowledge
Unit prices for land vary with location, size, shape, utility and encumbrances. Size often has an inverse relationship with price per unit. Appraisers support adjustments for these characteristics with market evidence such as paired sales.
Real-World Application
An appraiser compares two similar commercial lots and finds the corner lot with a regular shape and good access sold at a higher price per square foot. Paired sales in the area show the same pattern, supporting a location and configuration premium for the subject corner site.
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Previous Question
An appraiser is extracting site value from a $600,000 cash sale. The seller's records show an original construction cost of $250,000 and a depreciated book value of $110,000. The appraiser estimates current replacement cost new at $400,000 and accrued depreciation from all causes at $100,000. What is the indicated site value?
Next Question
A property’s stabilized NOI is $90,000. The building is worth $600,000 and the building capitalization rate is 10%. The land capitalization rate is 7.5%. What land value does the land residual technique indicate?