Two adjacent downtown lots are each valued at $500,000 individually. When combined into a single parcel, the assembled property supports a mixed-use development with a total value of $1,300,000. What valuation principle does the $300,000 increase in value above the sum of the individual lots illustrate?
Correct Answer
B) The principle of plottage, where combining contiguous parcels produces a value greater than the sum of the parts
Plottage is the increment of value created when two or more contiguous parcels are assembled into a single larger parcel. Here, the two lots have a combined individual value of $1,000,000 ($500,000 + $500,000), but the assembled parcel is worth $1,300,000 — a $300,000 plottage increment. This occurs because the larger parcel unlocks development potential, such as higher-density or mixed-use projects, that neither lot could support alone. Plottage is a recognized appraisal concept under standard valuation practice applied throughout California urban markets.
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- → The appraisal approach that estimates value by comparing a property to similar recently sold properties is the:
- → The period of time a structure continues to earn sufficient income to continue operations is referred to as the structure’s:
- → An appraiser in California is using the cost approach for a property in Sacramento and must account for entrepreneurial profit (also called developer's profit). A local developer confirms that typical profit margins in the Sacramento market are 15-20% of total development costs. How should the appraiser handle entrepreneurial profit?
- → A California buyer's agent is reviewing comparable sales data and notices that the county recorder's office lists different documentary transfer tax amounts for similar properties in the same city. Some properties show both a county and city transfer tax, while others show only the county tax. What does this difference indicate about the sale verification process?
- → When conducting a sales comparison analysis in California, an appraiser discovers that the subject property has an Accessory Dwelling Unit (ADU) that was built under California's recent ADU legislation. How should the appraiser handle this feature?
- → A California real estate agent is selecting comparable sales for a CMA on a property in Fresno. The agent finds a sale from 14 months ago in the same neighborhood. Under standard California CMA practice, why might the agent hesitate to use this comparable?
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- → Compared to other appraisal factors, appraisers generally find the the most difficult calculation to measure precisely.
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