Chapter 7 - Land Value and Highest and Best Use Flashcards

Chapter 7 - Land Value and Highest and Best Use Flashcards When valuing the land, if the residential improvements actually detract from the value of the land one option is toA.) ignore the value of the residential improvements.B.) disregard the non-conforming use.C.) demolish and remove the improvements, returning the property to the condition as if vacant.D.) renovate the improvements to arrive at highest and best use.C.) demolish and remove the improvements, returning the property to the condition as if vacant.Does land depreciateDo improvements depreciate Land does not depreciate.Improvements are subject to depreciation.Explain highest and best use as improved The permitted and most productive possible use of the land and improvements as they exist, considering the feasibility of retaining or renovating the existing improvements.If the cost of demolishing the existing improvements and building new ones would be offset by the new contribution to overall value, then retaining or renovating would not be considered feasible.In other words, the existing use will continue as highest and best unless the land value in its highest and best use would exceed the value of the entire property in its existing use plus the cost to remove the improvements.Techniques used in valuing land components (1) Direct sales comparison(2) Allocation(3) Extraction(4) subdivision development analysis(5) Land residual(6) Ground rent capitalization(7) Sales comparison *** (most reliable) How is residual land value derivedA value is estimated for a site developed for a certain use, and the combined costs of capital, labor, and coordination needed to create the improvements are subtracted from it.The remainder is the value attributed to the land in that use.How do you calculate what a property's land is worth on its own (minus any improvements) Compare the characteristics and sales prices of similar sites with the subject real estate.When the improved property is not in legal compliance it is said to beA.) financially unfeasible.B.) upside down.C.non-conforming.D.) constricted.C.non-conforming.Explain speculative usePeople often buy land to hold for future sale in the belief that the land's value will appreciate.This is considered a speculative use because there is a great risk in assuming the market will react in a certain way.the highest and best use of a property must be one that is:(1) Legally permissible: the use must comply with laws,

regulations, and ordinances.(2) Physically possible: the use

must be consistent with the site characteristics and

physical features of the property.(3) Financially feasible:

the use must add more value than it costs to implement.(4)

Maximally productive: the use must yield the most value in

comparison with other potential uses.How does an appraiser appraise vacant land VS.non-vacant land When the land is already vacant, the appraiser's task is clear-value the land as it is.When it is not vacant, the highest and best use must take into account the existing

use and all potential uses.

Explain single usesA property that is developed to a use that is unlike its neighbors.The existing use must pass the four tests for highest and best use, or else the analysis will conclude that some other use would be better.Explain highest and best use though vacant The permitted use of the land, assuming the land to be vacant or capable of being made vacant by demolishing existing improvements, that yields the highest present land value after deducting costs of labor, capital, and coordination.Explain excess landLand that exists beyond the requirements of a specific use

• not needed to support the primary use.

Explain legal nonconforming usesA use that was lawfully established and maintained but no longer conforms to the current zoning regulations is known as a legal nonconforming use.The test for maximal productivity of the property as

improved takes into account:

The costs of, and return on, making modifications to deal with deficiencies discovered in any of the previous tests.The maximally productive use, of the legal, possible, and feasible uses, will be the one that yields the highest ...residual land value The conclusion to a highest and best use analysis should specifyA.) when the optimal use could be achieved and who would be the most likely buyer or user.B.) the historical values of the property based on past individual owners.C.) the projected vacant land value to the user.D.) when a decrease in land values might occur in the future for the buyer or user.A.) when the optimal use could be achieved and who would be the most likely buyer or user.What value refers to the increase in unit value resulting from the improved usefulness when small plots are combined to form a larger one Plottage value.If there are already dozens of competing gas stations in the area, a site that is zoned appropriately and offers the ideal physical configuration for a gas station would be consideredA.) Non-conforming.B.) financially unfeasible.C.) financially feasible.D.) physically impossible.B.) financially unfeasible.What is the difference between land and improvements with regards to value Land is considered to have value.Improvements are considered to contribute value to the land.Two functions are served when an appraiser analyzes a

site's highest and best use as though vacant:

(1) The appraiser is able to determine what use of the site would produce the site's maximum income(2) The appraiser can more easily identify comparable properties because the analysis of the "highest and best use as though vacant" of comparable properties tend to be very similar to the subject property's analysis.To determine legal permissibility of a use, an appraiser

must consider:

(1) Private land restrictions: deed restrictions, covenants,

leases, agreements, easements, encroachments.(2) Public

legal restrictions: environmental regulations, building

codes, zoning ordinances.