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Residential Market Analysis and Highest & Best Use > Chapter 5 Case studies for highest and best use > Flashcards

Chapter 5 Case studies for highest and best use Flashcards

1
Q 
What is the minimum lot size that is legally permissible?
15,000 square feet
7,500 square feet
5,000 square feet
1 acre
A

7,500 sq ft

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2
Q 
What is the maximum number of acres that it is physically possible to develop into lots?
48 acres
16 acres
32 acres
7,500 square feet
A

32 acres

One-third of acreage will be lost to infrastructure and ponding, which means that 66.7% will be developable. 48 acres multiplied by 0.667 equals 32 acres that are developable.

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3
Q 
If the property is developed, how many acres will be lost to infrastructure and ponding?
8 acres
16 acres
32 acres
12 acres
A

16 acres

ne-third of acreage will be lost to infrastructure and ponding, which means that 66.7% will be developable. 48 acres multiplied by 0.667 equals 32 acres that are developable, which means that 16 acres will be lost.

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4
Q 
What is the maximum number of lots that it is physically possible and legally permissible to develop?
32
185
165
191
A

185

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5
Q 
What would be the cost to develop 185 lots?
$5,550,000
$3,200,000
$5,950,000
$5,860,000
A

$5,550,000

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6
Q 
What is the value of the 48 acres based on the current per-acre value indicated by the market?
$5,550,000
$1,200,000
$800,000
$880,000
A

$1,200,000

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7
Q 
What would be the total cost to acquire the property and develop 185 lots?
$5,550,000
$6,750,000
$6,950,000
$5,860,000
A

$6,750,000

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8
Q 
What would be retail sales value of the 185 lots, subtracting the closing costs?
$6,920,156
$6,750,000
$6,999,504
$6,455,366
A

$6,920,156

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9
Q

Would a residential subdivision of this type be financially feasible?
Yes
No

A

yes

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10
Q

What is the highest and best use of this property?
Future development of a residential subdivision of 185 lots with 7,500 square feet each
Immediate development of a residential subdivision with 185 lots of 7,500 square feet each
Immediate development of a residential subdivision with 277 lots of 5,000 square feet each
Use as a single-family homesite

A

Immediate development of a residential subdivision with 185 lots of 7,500 square feet each

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11
Q 
What is the maximum home size that would be legally permissible to build on this site, if vacant?
2,600 square feet
6,500 square feet
2,400 square feet
2,500 square feet
A

2,600 sq ft

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12
Q 
What would be the cost to build a 2,600 square foot home on the subject’s site?
$325,000 to $364,000
$260,000
$240,000
$250,000
A

$260,000

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13
Q 
What is the value of the subject’s site as vacant?
$60,000
$65,000
$325,000
$55,000
A

$65,000

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14
Q 
What would be the total cost of acquiring the subject’s site (if vacant) and constructing a 2,600 square foot home on it?
$340,000
$320,000
$325,000
$260,000
A

$325,000

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15
Q 
What would be the market value of a new 2,600 square foot home on the subject’s site?
$312,500 - $350,000
$300,000 - $325,000
$364,000 - $384,000
$325,000 - $364,000
A

$325,000 - $364,000

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16
Q 
What would be the residual value of the subject’s site, based on construction of a 2,600 square foot new home?
$65,000 - $104,000
$52,500 - $65,000
$40,000 - $64,000
$104,000 - $124,000
A

$65,000 - $104,000

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17
Q

Would construction of a new 2,600 home on the site (if vacant) be considered financially feasible?
Yes
No
Cannot determine from the information provided

A

Yes

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18
Q

What would be the maximally productive use of the subject site, as vacant?
Construction of a 2,400 square foot home
Construction of a 2,500 square foot home
Construction of a 2,600 square foot home
Remain vacant for development at a future date

A

Construction of a 2,600 square foot home

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19
Q

Would razing the existing home be considered financially feasible?
Yes
No
Cannot determine from the information provided

A

No

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20
Q

What is the highest and best use of the subject property, as currently improved?
Current use
Razing and removing home, and constructing new home

A

Current Use

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21
Q 
What is the residual land value for House # 1, considering financing costs?
$19,500
$50,500
$27,200
$48,000
A

$50,500

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22
Q 
What is the residual land value for House # 2, considering financing costs?
$25,200
$55,500
$27,200
$48,000
A

$27,200

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23
Q 
What is the residual land value for House # 3, considering financing costs?
$48,000
$27,600
$58,500
$44,200
A

$44,200

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24
Q 
Which house(s) is (are) considered financially feasible, considering financing costs?
House 1 only
Houses 1 and 3 only
Houses 2 and 3 only
None of the above
A

House 1 only

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25
Q 
Which house produces the greatest residual land value, considering financing costs?
House 1
House 2
House 3
They are all equal
A

House 1

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26
Q 
What is the highest and best use of this property considering marketing time and financing costs?
Construction of House 1
Construction of House 2
Construction of House 3
None of these
A

Construction of House 1

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27
Q 
What is the gross annual income of the existing single-family home?
$14,400
$19,500
$10,080
$10,800
A

$14,400

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28
Q 
What is the Net Operating Income of the existing single-family home?
$14,400
$9,900
$10,080
$10,800
A

$10,080

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29
Q 
What is the value of the subject property for single-family use, based on income?
$102,000
$122,580
$97,800
$126,000
A

$126,000

30
Q 
What would be the gross annual income for the subject property as a four-unit?
$14,400
$28,800
$17,200
$17,280
A

$28,800

31
Q 
What would be the Net Operating Income for the subject property as a four-unit?
$18,400
$28,800
$17,000
$17,280
A

$17,280

32
Q 
What would be the subject property’s value as a four-unit?
$184,000
$188,800
$216,000
$172,800
A

$172,800

33
Q 
What would be the total of conversion costs and loss of income during conversion?
$40,000
$47,200
$80,000
$43,600
A

$43,600

34
Q 
What is the subject property’s current value as a four-unit, considering the costs of conversion and lost income during conversion?
$129,200
$122,300
$132,800
$216,400
A

$129,200

35
Q

Not considering any possible rent loss during the conversion, what is the maximally productive use of the subject property?
Current use as a single-family home
Conversion to a 4-unit
Cannot determine from the information provided

A

Conversion to a 4-unit

36
Q

If the conversion project took six months, would the conversion be considered financially feasible?
Yes
No
Cannot determine from the information provided

A

No

37
Q

Would purchasing the property, tearing down the home, and selling the lot be considered financially feasible?
Yes
No
Cannot be determined

A

yes

38
Q 
What would the profit be from purchasing the property, tearing down the home, and selling the lot?
$10,000
$30,000
$50,000
There would be no profit
A

$10,000

Purchasing the property for $170,000, and demolishing the improvements at a cost of $20,000, and selling the property for $200,000 would produce a $10,000 profit.

39
Q 
What would be the percentage return to an investor who purchased the property, razed and removed the improvements, and sold the lot?
4.5%
5.3%
6.67%
There would be no profit
A

5.3%

Purchasing the property for $170,000, and demolishing the improvements at a cost of $20,000, and selling the property for $200,000 would produce a $10,000 profit. $10,000 divided by the cash outlay of $190,000 equals a return of 5.3%.

40
Q

Before concluding that the highest and best use of the property is to raze and remove the improvements, what additional information might an appraiser need to analyze?
The actual contractor’s bid for demolition
The return that is typically required by investors in the market
The type of home that should be constructed on the site
The environmental impact of razing the home

A

The return that is typically required by investors in the market

41
Q 
What is the annual absorption rate indicated by the Patricia Gardens subdivision?
10 lots per year
40 lots per year
11 lots per year
Cannot be determined
A

10 lots per year

42
Q 
What is the annual absorption rate indicated by the Fairwood Estates subdivision?
10 lots per year
50 lots per year
11 lots per year
8 lots per year
A

11 lots per year

43
Q 
What is the annual absorption rate indicated by the Lockwood Manor subdivision?
9 lots per year
10 lots per year
27 lots per year
8 lots per year
A

9 lots per year

44
Q 
What is the overall market-indicated absorption rate for lots in this area?
12 lots per year
10 lots per year
20 lots per year
Cannot be determined
A

10 lots per year

45
Q

Is the proposed six-month listing period long enough to sell all 10 of the subject’s lots?
Yes
No
Cannot be determined

A

no

46
Q

As vacant, what would be the physically possible and legally permissible use(s) for the subject property?
One 5-acre homesite
Two 2.5-acre homesites
Either of these

A

either of these

47
Q 
As vacant, what would be the value of the property if used as a 5-acre homesite?
$75,000
$80,000
$100,000
$110,000
A

$80,000

48
Q 
As vacant, what would be the value of the property if used as two 2.5-acre homesites?
$75,000
$80,000
$100,000
$110,000
A

$110,000

49
Q

As vacant, what would be the highest and best use for the subject property?
One 5-acre homesite
Two 2.5-acre homesites
Either of these

A

Two 2.5-acre homesites

50
Q 
As currently improved, what is the value of the property under Alternative 1, which is its current use as a home and 5-acre site?
$150,000
$180,000
$200,000
$210,000
A

$180,000

51
Q 
As currently improved, what is the total value of the property under Alternative 2, which proposes to subdivide off a 2.5 acre homesite?
$150,000
$175,000
$200,000
$210,000
A

$210,000

52
Q

Is Alternative 2, which proposes to subdivide the property into two 2.5-acre sites and keep the improvements, considered financially feasible?
Yes
No

A

Yes

53
Q 
As currently improved, what is the net value of the property under Alternative 3, which proposes to raze the improvements and subdivide into two 2.5-acre homesites?
$110,000
$90,000
$130,000
$180,000
A

$90,000

54
Q

Is Alternative 3, which proposes to raze the improvements and subdivide into two 2.5-acre homesites, considered financially feasible?
Yes
No

A

no

55
Q 
What is the highest and best use of the property, as improved?
Alternative 1
Alternative 2
Alternative 3
They are all equal
A

alternative 2

56
Q 
How many housing units are required for Sylvan Beach residents?
2,506
1,974
2,309
Cannot be determined
A

2506

57
Q 
How many housing units are available in Sylvan Beach?
2,506
1,974
2,309
Cannot be determined
A

1974

58
Q

What is the result of your analysis regarding the supply of housing units compared to the demand?
The community needs an additional 498 housing units
The community has an oversupply of 498 housing units
The community needs an additional 532 housing units
The community has an oversupply of 532 housing units

A

The community needs an additional 532 housing units

Population is 8,771 divided by 3.5 persons per household indicates a need for 2,506 housing units. Currently there are 1,974 housing units available, which means there is a shortfall (need) for 532 units.

59
Q

Does it appear to be feasible to construct new housing units in Sylvan Beach?
Yes
No

A

no

60
Q

Is the renovation of the home for single-family use considered financially feasible?
Yes
No
Cannot tell from the information provided

A

no

61
Q 
What would the value of the property be if the home was razed and removed?
$300,000
$350,000
$650,000
$440,000
A

$350,000

62
Q

Is razing and removing the home considered financially feasible?
Yes
No
Not enough information is provided

A

no

63
Q 
What would be the value of the property after completion of conversion to multi-family use?
$1,150,000
$1,078,000
$932,500
$1,250,000
A

$1,078,000

64
Q 
What would be the total cost of property acquisition and conversion to multi-family use?
$650,000
$1,078,000
$932,500
$1,250,000
A

$932,500

65
Q

Would conversion to multi-family use be considered financially feasible?
Yes
No
Cannot determine from the information provided

A

yes

66
Q 
What would be the total cost of property acquisition and conversion to mixed commercial/apartment use?
$932,500
$1,107,500
$1,078,000
$1,250,000
A

$1,107,500

67
Q

Would conversion to mixed commercial/apartment use be considered financially feasible?
Yes
No
Cannot determine from the information provided

A

Yes

68
Q

Which of the four alternative uses is (are) considered financially feasible?
1, 3, and 4 only
3 and 4 only
3 only
All alternative uses are financially feasible

A

3 and 4 only

69
Q 
What is the rate of return on Alternative 3, multi-family use?
12.9%
16.5%
15.6%
Negative
A

15.6%

70
Q 
What is the rate of return on Alternative 4, mixed commercial/apartment use?
12.9%
15.6%
16.5%
Negative
A

12.9

71
Q

Which alternative represents the highest and best use of the subject property?
Alternative 1 – Renovate for single-family use
Alternative 2 – Raze and remove home
Alternative 3 – Convert to multi-family home
Alternative 4 – Convert to mixed commercial/apartment use

A

Alternative 3 – Convert to multi-family home

Residential Market Analysis and Highest & Best Use (6 decks)

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