Why does the excess versus surplus distinction matter to the value conclusion?
Correct Answer
D) Only excess land supports a separate parcel value
Why this is correct: Excess land is a portion of a site that is legally separable and can be sold or developed independently, thus supporting a separate parcel value. Surplus land is an area that is not needed for the highest and best use but cannot be separately sold or developed, so it does not add a separate parcel's worth of value. Treating surplus as excess would overstate value. Why the other choices are wrong: Excess land may be legally conveyed, but surplus land also can be conveyed; the distinction is not about conveyability alone. Surplus land is not excluded from the appraisal; it is valued as part of the whole site. Excess land does not change the property's zoning category; zoning is a separate legal designation. Exam tip: The key distinction is economic separability: excess land can be a separate lot; surplus land cannot.
Why This Is the Correct Answer
Why this is correct: Excess land is a portion of a site that is legally separable and can be sold or developed independently, thus supporting a separate parcel value. Surplus land is an area that is not needed for the highest and best use but cannot be separately sold or developed, so it does not add a separate parcel's worth of value. Treating surplus as excess would overstate value. Why the other choices are wrong: Excess land may be legally conveyed, but surplus land also can be conveyed; the distinction is not about conveyability alone. Surplus land is not excluded from the appraisal; it is valued as part of the whole site. Excess land does not change the property's zoning category; zoning is a separate legal designation. Exam tip: The key distinction is economic separability: excess land can be a separate lot; surplus land cannot.
More land-or-site-valuation Questions
Under which condition is the land residual technique most applicable?
What is the appraiser's obligation when a site's legal description does not match its apparent physical boundaries?
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?
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