REAL 5080 EXAM 2 QUESTIONS & VERIFIED
ANSWERS
Value-Size Relationship Theory - Answers - Linear - Zero cost to subdivide
Arbitrage away non-linear (buy large, sell small)
Non-Linear
Recognizes the cost to subdivide
Developers are allowed to recoup costs
Plattage - Answers - Value created through subdivision - Non-Linear (Concave)
Value created through assembly - Linear (Convex)
Excess Land - Answers - Land not necessary to support the existing or planned
improvements/income
Shape of Site - Answers - Frontage vs. Depth - Variations in frontage to depth ratio
Frontage is typically more valuable
Regular vs. Irregular
Irregular shaped lots may lead to excess land
Corner Lots & Cul-De-Sacs
Corner lots have higher value
Topo
Likely to have greatest impact as things closer affect value more than things far away
Factors associated with building value (Math) - Answers - Textbook - Value = Bldg Area
*Y
Value increases at a decreasing rate with respect to bldg area (0<Y<1)
Alternative - Value = Foot * Height
Value increases at a decreasing rate with respect to floor space (0<A<1)
Value increases at an increasing rate with respect to height of bldg (stories) - Beta>1
Factors associated with building value - Answers - Building materials & quality
Design
Proportion & Adequacy
Condition
Compatibility & Conformity
Compatibility & Conformity - Answers - Largest home in a neighborhood typically sells
for relatively less to other large homes
, Smallest home in a subdivision sells for a premium
Use Analysis - Answers - Appraiser must make assumption about property's expected
use
Value as:
Vacant vs. Improved
Land is valued using the "as vacant" approach
HBU, expected, and Most Probable use
Appraisers say they use HBU but typically use expected use analysis in appraisals
Highest & Best Use Analysis - Answers - Relaxing the legally permissible constraint (Ex.
zoning)
Value is the expected value of a representative set of feasible uses.
Criteria (Scoping)
Legally permissible, physically possible, financially feasible, and
Maximally productive
Value indivd'l land uses in each possible (probable) zoning category as if vacant
Weigh result by a probability of the outcome
Result - A set of feasible uses being identified
Most Probable Use Analysis - Answers - The single most probable use of the land
Same criteria as HBU (legally, physically, financially, & max productivity)
Value indvd'l land uses in most probable use as if vacant
Result - A single land use that may not be maximizing the land use
Note for Appraising Land as if Vacant - Answers - - when sufficient comparables are
available, collect comparable with consistent (matching) definitions of maximally
productive
For example, if using highest and best use premise, collect comparable with matching
highest and best use
Interim use - Answers - One which is currently the HBU of the site, but likely to be
superseded by another use in a relatively short period of time
Consistent Use Requirement - Answers - Improvements must be valued in the same
use as land
Ex. As Vacan (MultiFamily): Land = $1M
As Vacant SF Dwelling: Land = $50K, Improvements = $100k
ANSWERS
Value-Size Relationship Theory - Answers - Linear - Zero cost to subdivide
Arbitrage away non-linear (buy large, sell small)
Non-Linear
Recognizes the cost to subdivide
Developers are allowed to recoup costs
Plattage - Answers - Value created through subdivision - Non-Linear (Concave)
Value created through assembly - Linear (Convex)
Excess Land - Answers - Land not necessary to support the existing or planned
improvements/income
Shape of Site - Answers - Frontage vs. Depth - Variations in frontage to depth ratio
Frontage is typically more valuable
Regular vs. Irregular
Irregular shaped lots may lead to excess land
Corner Lots & Cul-De-Sacs
Corner lots have higher value
Topo
Likely to have greatest impact as things closer affect value more than things far away
Factors associated with building value (Math) - Answers - Textbook - Value = Bldg Area
*Y
Value increases at a decreasing rate with respect to bldg area (0<Y<1)
Alternative - Value = Foot * Height
Value increases at a decreasing rate with respect to floor space (0<A<1)
Value increases at an increasing rate with respect to height of bldg (stories) - Beta>1
Factors associated with building value - Answers - Building materials & quality
Design
Proportion & Adequacy
Condition
Compatibility & Conformity
Compatibility & Conformity - Answers - Largest home in a neighborhood typically sells
for relatively less to other large homes
, Smallest home in a subdivision sells for a premium
Use Analysis - Answers - Appraiser must make assumption about property's expected
use
Value as:
Vacant vs. Improved
Land is valued using the "as vacant" approach
HBU, expected, and Most Probable use
Appraisers say they use HBU but typically use expected use analysis in appraisals
Highest & Best Use Analysis - Answers - Relaxing the legally permissible constraint (Ex.
zoning)
Value is the expected value of a representative set of feasible uses.
Criteria (Scoping)
Legally permissible, physically possible, financially feasible, and
Maximally productive
Value indivd'l land uses in each possible (probable) zoning category as if vacant
Weigh result by a probability of the outcome
Result - A set of feasible uses being identified
Most Probable Use Analysis - Answers - The single most probable use of the land
Same criteria as HBU (legally, physically, financially, & max productivity)
Value indvd'l land uses in most probable use as if vacant
Result - A single land use that may not be maximizing the land use
Note for Appraising Land as if Vacant - Answers - - when sufficient comparables are
available, collect comparable with consistent (matching) definitions of maximally
productive
For example, if using highest and best use premise, collect comparable with matching
highest and best use
Interim use - Answers - One which is currently the HBU of the site, but likely to be
superseded by another use in a relatively short period of time
Consistent Use Requirement - Answers - Improvements must be valued in the same
use as land
Ex. As Vacan (MultiFamily): Land = $1M
As Vacant SF Dwelling: Land = $50K, Improvements = $100k
