A Virginia property owner enrolled 100 acres of farmland in the land use taxation program seven years ago. The land has been assessed at use value ($500/acre) rather than market value ($4,000/acre) throughout this period. The owner now decides to sell the land to a developer who will immediately convert it to a residential subdivision. The local tax rate is $0.50 per $100 of assessed value. Which of the following most accurately describes the rollback tax liability triggered by the conversion?
Correct Answer
B) The rollback covers the most recent five years of tax savings and is a lien on the land, typically resolved at closing
Under Va. Code § 58.1-3237, when land enrolled in the land use taxation program is converted to a non-qualifying use, rollback taxes are assessed for the five most recent tax years (not the entire enrollment period). The rollback equals the difference between taxes paid at use value and taxes that would have been paid at market value for each of those five years, plus interest. The rollback tax is a lien on the land and is typically paid at closing from the sale proceeds, regardless of which party technically 'owes' it. Calculation of annual rollback per year: Market value tax = (100 acres × $4,000 × $0.50/100) = $2,000/year. Use value tax = (100 acres × $500 × $0.50/100) = $250/year. Annual difference = $1,750. Five-year rollback (before interest) = $8,750.
Why This Is the Correct Answer
Why the Other Options Are Wrong
Deep Analysis of This Valuation Question
Background Knowledge for Valuation
Real World Application in Valuation
Common Mistakes to Avoid on Valuation Questions
Related Topics & Key Terms
Key Terms:
Related Concepts
Homestead portability allows homeowners to transfer a portion of their accumulated homestead tax savings to a new homestead in the same state.
The income approach estimates a property's value based on the income it generates by converting net operating income into a value estimate using a capitalization rate. It is the preferred method for income-producing properties.
Many states have laws to limit how much property taxes can increase each year, regardless of market value fluctuations.
More Valuation Questions
In Utah, property taxes are collected by which governmental entity?
In Utah, how is a primary residence assessed for property tax purposes under the residential exemption?
Which of the following best describes how Utah's rapid population growth, driven partly by Silicon Slopes tech expansion, has affected housing affordability?
When appraising a property in Utah's Wasatch Front, which environmental hazard would an appraiser need to consider that is less common in most other states?
The rapid growth of the 'Silicon Slopes' tech corridor in Utah has most directly affected real estate in which area?
- → The income approach to appraisal is most commonly used for which type of property?
- → Which formula correctly calculates the capitalization rate?
- → External obsolescence in Oklahoma:
- → The sales comparison approach to appraisal is most appropriate for which type of property?
- → Which of the following correctly lists the three types of depreciation recognized in real estate appraisal?
- → The sales comparison approach to appraisal is most commonly used for which type of property?
- → Which four tests must a use satisfy to qualify as the highest and best use of a property?
- → Three depreciation:
- → Cap rate:
- → Which formula best represents the cost approach to appraisal?
People Also Study
Buyer Representation Agreement
8% of exam
Property Ownership
10% of exam
Land Use Controls and Regulations
8% of exam
Financing
12% of exam
Related Articles
Appraisal & Valuation for the Real Estate Exam (2026): CMA, Comps, Cap Rate + Examples
Learn the three approaches to value, CMA basics, and cap rate questions with examples and practice.
How to Study Real Estate Valuation Questions Without Mixing Price and Value
A topic that feels clear in notes can still fail in practice if recall has not caught up with recognition. If you are searching for study real estate...
How to Study Real Estate Finance Topics Without Letting Loan and Valuation Terms Blur Together
Use a cleaner study system for real estate finance topics so loan terms, valuation language, and formulas stop blending together.