chapter 3 site valuation by other methods

Question 1

A method of estimating land value in which the depreciated cost of the improvements on an improved property is calculated and deducted from the total sale price to arrive at an estimated sale price for the land.

Answer 1

extraction

Question 2

Improved sales in rural areas are frequently valued by the

Answer 2

extraction method

because the building improvements may have a minimal contributory value in comparison to the underlying land value.

Question 3

A run-down neighborhood grocery store on a good corner location in a desirable older neighborhood recently sold for $400,000.

The reproduction cost of the improvements today would be $250,000 and the total depreciation is estimated to be 80%.

By extraction, what is the land value?

Answer 3

$50,000

$250,000 x .80 = $200,000. That amount is lost and gone forever. So we subtract the depreciation amount from the cost new $250,000 - $200,000 = $50,000.

OR

$250,000 (cost new) x .20 and arrive directly at the figure of $50,000.

Question 4

The sale price of the property was $250,000. Your investigation of the Building Department’s records allow you to estimate that the reproduction cost of the improvements would currently be $280,000. After an analysis of the property, you conclude that the total accrued depreciation is 60%. On that basis, what would be your conclusion as to the value of the land?

Answer 4

138,000

$280,000 x .60 (depreciation) = $168,000

$280,000 - $168,000 = $112,000 (contributory value of improvements)

$250,000 (total property value) - $112,000 (contributory value of improvements) = $138,000 (value of land)

Question 5

A method of estimating land value in which sales of improved properties are analyzed to establish a typical ratio of land value to total property value and this ratio is applied to the property being appraised or the comparable sale being analyzed.

Answer 5

allocation method

Question 6

The process of valuing a universe of properties as of a given date using standard methodology, employing common data, and allowing for statistical testing. (USPAP, 2016-2017 ed.) Often associated with real estate tax assessment valuation.

Answer 6

mass appraisals

Question 7

The value of an improved subject property by the sales comparison approach is $450,000. The allocation ratio, as indicated by sales of other properties in the area, indicates that the land-to-total-value ratio is 60%. What is the indicated site value of this property by the allocation method?
$160,000
$180,000
$270,000
$360,000

Answer 7

$270,000

Question 8

A property sold for $375,000. The reproduction cost of the building was $600,000 and its estimated deprecation was 70%. By extraction, what is the value of the land?
$110,000
$180,000
$195,000
$240,000

Answer 8

$195,000

Question 9

A comparable sale recently sold for $340,000. The typical land value to property value ratio in that area is 30:70. By allocation, what is the value of the land in that comparable sale?
$70,000
$98,000
$102,000
$238,000

Answer 9

$102,000

$340,000 x .3 = $102,000.

Question 10

The two methods that have frequent application in both rural and urban areas are the \_\_\_\_\_\_\_\_\_\_\_\_\_ method and the \_\_\_\_\_\_\_\_\_\_\_\_\_ method.
Land Residual, Extraction
Allocation, Subdivision Development
Allocation, Extraction
Ground Rent Capitalization, Extraction

Answer 10

Allocation, Extraction

Question 11

You find a comparable sale that recently sold for $260,000. The typical land value to property value ratio in that area is 35:65. By allocation, what is the value of the land in that comparable sale?
$35,000
$65,000
$77,000
$91,000

Answer 11

$91,000

$260,000 x .35 = $91,000

Question 12

A method of estimating land value in which sales of improved properties are analyzed to establish a typical ratio of land value to total property value and this ratio is applied to the property being appraised or the comparable sale being analyzed is the definition of the \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ method of site valuation.
Allocation
Land Residual
Extraction
Subdivision Development

Answer 12

allocation

Question 13

A method of estimating land value in which the depreciated cost of the improvements on an improved property is calculated and deducted from the total sale price to arrive at an estimated sale price for the land is the definition of the \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ method of site valuation.
Allocation
Land Residual
Extraction
Subdivision Development

Answer 13

extraction

Question 14

A comparable sale recently sold for $300,000. The typical land value to property value ratio in that area is 40:60. By allocation, what is the value of the land in that comparable sale?
$120,000
$128,000
$142,000
$180,000

Answer 14

$120,000

Question 15

A method of estimating land value when subdividing and developing a parcel of land is the highest and best use of that land. When all direct and indirect costs and entrepreneurial incentive are deducted from an estimate of the anticipated gross sales price of the finished lots (or the completed improvements on those lots), the resultant net sales proceeds are then discounted to present value at a market-derived rate over the development and absorption period to indicate the value of the land.

Answer 15

subdivision development method

Question 16

A method of estimating land value in which the net operating income attributable to the land is isolated and capitalized to produce an indication of the land’s contribution to the total property.

Answer 16

land residual method

Question 17

A method of estimating land value; applied by capitalizing ground rent at a market-derived rate. This method is useful when comparable rents, rates, and factors can be developed from an analysis of sales of leased land or other market sources.

Answer 17

ground rent capitalization method

Question 18

A method of estimating land value in which the net operating income attributable to the land is isolated and capitalized to produce an indication of the land’s contribution to the total property is the definition of the \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ method of site valuation.
Allocation
Land Residual
Extraction
Subdivision Development

Answer 18

land residual

Question 19

The median sale price of homes in a market area and the median land sale price in that market area could be used in calculating land values by the \_\_\_\_\_\_\_\_\_\_\_ method.
Land residual
Extraction
Allocation
Subdivision development

Answer 19

allocation

Question 20

The subject property has a total value of $315,000 by the sales comparison approach. A competitive neighborhood nearby has home sales with a median value of $300,000, and recent lot sales at $75,000. By allocation, what would be the value of the subject land?
$68,220
$78,750
$82,400
$88,500

Answer 20

$78,750

$75,000 / $300,000 = .25 or 25%.
$315,000 x .25 = $78,750

Question 21

The subdivision development method is a variation of \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ analysis.
Gross Rent Multiplier
Internal Rate of Return
Discounted Cash Flow
Construction Breakdown

Answer 21

discounted cash flow

Question 22

The subdivision development method should only be used when ________.
There is commercial land that is leased
The improvements are income producing
The appraisal is a mass appraisal
The highest and best use for subdivision and development

Answer 22

The highest and best use for subdivision and development

Question 23

analyze the comparables to determine whether each one is overall superior, equal to, or inferior in comparison to the subject.

Answer 23

relative comparison analysis

Question 24

This is a variant of relative comparison analysis, in which the comparable sales are ranked in ascending or descending order. Then the relative position of the subject is determined within the array

Answer 24

ranking analysis

Question 25

A parcel contains 3.5 acres. It is worth $60,000 per acre as residential land and $225,000 as a commercial site. If the zoning allows both, what is the highest and best use?

Answer 25

commercial $60,000 x 3.5 = $210,000 as residential land. It is worth $225,000 as commercial land. That's an easy choice. Go with the bigger number. Therefore, the highest and best use is Commercial.

Question 26

The temporary use to which a site or improved property is put until a different use becomes maximally productive.

Answer 26

interim use

Question 27

A parcel is valued at $90,000. Zoning allows it to be subdivided into 4 lots and it is estimated that each lot could sell for $35,000. Site development costs (sewer, grading, road, etc.) would cost $60,000. What is the highest and best use?

Answer 27

$35,000 x 4 = $140,000 $140,000 - $60,000 = $80,000 Leave it Alone!

Question 28

the combining of two or more parcels, usually but not necessarily contiguous, into one ownership or use; the process that may create plottage.

Answer 28

assemblage

Question 29

the increment of value that often occurs when two or more sites are combined to produce greater utility, resulting in a higher productivity or income than could be obtained from the individual smaller sites.

Answer 29

plottage value

Question 30

this might be a solution to cure either physical or legal problems, when we are considering highest and best use.

Answer 30

assemblage

Question 31

``` The temporary use to which a site or improved property is put until a different use becomes maximally productive is the definition of __________ use. Intermediate Indeterminate Conditional Interim ```

Answer 31

interim

Question 32

``` A parcel is valued at $140,000. Zoning allows it to be subdivided into 5 lots and it is estimated that each lot could sell for $45,000. Site development costs (sewer, grading, road, etc.) would amount to $70,000. What is the highest and best use? Develop it Leave it alone Unable to determine Find an interim use ```

Answer 32

Develop it

Question 33

``` A parcel is valued at $190,000. Zoning allows it to be subdivided into 6 lots and it is estimated that each lot could sell for $42,000. Site development costs (sewer, grading, road, etc.) would amount to $80,000. What is the Highest and Best Use? Develop it Leave it alone Unable to determine Find an interim use ```

Answer 33

leave it alone

Question 34

A parcel contains 6 acres and would be permitted to have 5 commercial units. It is worth $40,000 per acre as residential land and $50,000 per permitted unit as a commercial site. If the zoning allows both, what is the highest and best use? Unable to determine Residential Commercial They both would be the highest and best use

Answer 34

commercial

Question 35

``` Which of the following do mass appraisals NOT employ? Standard methodology Statewide data Common data Statistical testing ```

Answer 35

statewide data

Question 36

``` Which would be a normal source of information to develop support for an allocation ratio? Published studies Mass appraisals Consultations with developers All of the above ```

Answer 36

all of the above

Question 37

A parcel contains 4.5 acres. It is worth $50,000 per acre as residential land and $200,000 as a commercial site. If the zoning allows both, what is the highest and best use? Unable to determine Residential Commercial They both would be the highest and best use

Answer 37

residential

Question 38

``` If a property has a ground rent of $60,000 per year, which is market rent, and the appropriate capitalization rate is 9%, what is the value of the land, by the ground rent capitalization method? $618,994 $646,646 $666,667 $679,818 ```

Answer 38

$666,667 $60,000 / .09 = $666,667

Question 39

``` A property sold for $375,000. The reproduction cost of the building was $600,000 and its estimated deprecation was 70%. By extraction, what is the value of the land? $110,000 $180,000 $195,000 240,000 ```

Answer 39

$195,000

Question 40

``` A property sold for $200,000. The reproduction cost of the building was $240,000 and its estimated deprecation was 75%. By extraction, what is the value of the land? $60,000 $80,000 $120,000 $140,000 ```

Answer 40

$140,000

Question 41

``` The combining of two or more parcels, usually but not necessarily contiguous, into one ownership or use, is the definition of ______. Plottage Plattage Assemblage Merging ```

Answer 41

assemblage

Question 42

``` The two methods that have frequent application in both rural and urban areas are the __________ method and the __________ method. Land residual, Extraction Allocation, Subdivision development Allocation, Extraction Ground rent capitalization, Extraction ```

Answer 42

allocation, extraction