chapter 3 site valuation by other methods Flashcards
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.
extraction
Improved sales in rural areas are frequently valued by the
extraction method
because the building improvements may have a minimal contributory value in comparison to the underlying land value.
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?
$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.
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?
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)
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.
allocation method
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.
mass appraisals
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
$270,000
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
$195,000
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
$102,000
$340,000 x .3 = $102,000.
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
Allocation, Extraction
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
$91,000
$260,000 x .35 = $91,000
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
allocation
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
extraction
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
$120,000
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.
subdivision development method
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.
land residual method
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.
ground rent capitalization method
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
land residual
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
allocation
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
$78,750
$75,000 / $300,000 = .25 or 25%.
$315,000 x .25 = $78,750
The subdivision development method is a variation of \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ analysis. Gross Rent Multiplier Internal Rate of Return Discounted Cash Flow Construction Breakdown
discounted cash flow
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
The highest and best use for subdivision and development
analyze the comparables to determine whether each one is overall superior, equal to, or inferior in comparison to the subject.
relative comparison analysis
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
ranking analysis
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?
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.
The temporary use to which a site or improved property is put until a different use becomes maximally productive.
interim use
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?
$35,000 x 4 = $140,000 $140,000 - $60,000 = $80,000
Leave it Alone!
the combining of two or more parcels, usually but not necessarily contiguous, into one ownership or use; the process that may create plottage.
assemblage
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.
plottage value
this might be a solution to cure either physical or legal problems, when we are considering highest and best use.
assemblage
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
interim
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
Develop it
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
leave it alone
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
commercial
Which of the following do mass appraisals NOT employ? Standard methodology Statewide data Common data Statistical testing
statewide data
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
all of the above
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
residential
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
$666,667
$60,000 / .09 = $666,667
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
$195,000
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
$140,000
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
assemblage
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
allocation, extraction
