Why is the subdivision development method sometimes described as a test of feasibility rather than a valuation method?
Correct Answer
C) It shows whether development pays at a given land price
Why this is correct: The subdivision development method estimates land value by deducting all development costs and developer profit from projected sales revenue. It tests feasibility by showing whether a project is profitable at a given land cost, or alternatively, calculates the residual land value. Why the other choices are wrong: It cannot produce a value indication is false; it does yield a residual land value. It applies only where a plat has been recorded is incorrect; it's used for proposed developments. It requires the land price to be known in advance is not true; it can solve for land price. Exam tip: This method answers both feasibility and value questions via residual calculation.
Why This Is the Correct Answer
Why this is correct: The subdivision development method estimates land value by deducting all development costs and developer profit from projected sales revenue. It tests feasibility by showing whether a project is profitable at a given land cost, or alternatively, calculates the residual land value. Why the other choices are wrong: It cannot produce a value indication is false; it does yield a residual land value. It applies only where a plat has been recorded is incorrect; it's used for proposed developments. It requires the land price to be known in advance is not true; it can solve for land price. Exam tip: This method answers both feasibility and value questions via residual calculation.
More Land/Site Questions
Under which condition is the land residual technique most applicable?
Why can the same physical parcel carry different values in two assignments?
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?
Why does a developer's required profit rise for a longer subdivision project?
How does holding cost enter the valuation of land bought for future development?
Excess land is best described as land that has which characteristic?
Plottage value arises in which of the following situations?
Which of the following is an off-site improvement rather than a site improvement?
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