Exam (elaborations)
REE 4103 Chapter 16.
REE 4103 Chapter 16.
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REE 4103 Chapter 16A property includes a one-unit residence on the southeast corner of a five-acre parcel
with 467 feet of frontage on each of two roads. The house alone (without land) would be
worth $100,000. It was never platted and there are no deed restrictions. The local
zoning ordinance only requires two acres with 200 feet of road frontage. The market for
houses with up to five acres is good. Excess land, not required by zoning, sells for only
$3,000 per acre. A buildable pad in this market is worth $30,000. The site is far enough
from the northern property line to allow an almost perfect split of the parcel in half. What
is the highest and best use of the site as though vacant and as improved? -
ANS-Highest and best use as though vacant= Two parcels with +/-2.5 acres each.
Highest and best use as improved= Leave the house and sell off the other site
An improved residential property has the following characteristics:
The land if it were vacant is valued at $85,000
The value of the property as it is improved (with the house) is $75,000
The cost of removing the house would be $5,000
What is the market value of the rights to this property? - ANS-property value is 80,000
Highest and best use of the site as though vacant - ANS-is required in all market value
appraisals of real property, may require a change in zoning classification, assumes site
is vacant or could be made vacant
Of the following alternative projects, one represents the highest and best use of a
particular site being analyzed. Select the use that returns the greatest annual net
income to the land after deducting a 10% return to the building: Office Building: Building
costs are $500,000 and the annual net income is $76,000. Shopping Center: Building
costs are $700,000 and the annual net income is $98,000. Apartment: Building costs
are $800,000 and the annual net income is $104,000. - ANS-shopping center
Of the following alternative projects, one represents the highest and best use of a
particular site being analyzed. Select the use that returns the greatest residual land
value. The market cap rate for the improvements for all the alternative uses is 10%. The
market cap rate for the land for all the alternative uses is 12%. The cost to construct
(and indicated value of the improvements) are: 1. Apartment - $1,200,000; 2. Office -
$850,000; 3. Retail - $900,000. The net operating income for the alternatives are: 1.
Apartment - $162,000; 2. Office - $125,000; 3. Retail - $105,000. - ANS-apartment
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