Property ValuationIntermediateCalifornia Exam

The economic principle of 'plottage' refers to:

AThe decrease in value of a property due to external forces, per standard California valuation practice

BThe increased value created when adjacent parcels are combined (assembled) into one larger parcelCorrect

CThe maximum density of development allowed under current zoning, under standard appraisal methodology

DThe process of dividing a large parcel into smaller lots for sale, as typically applied in a comparative market analysis

Why The increased value created when adjacent parcels are combined (assembled) into one larger parcel Is Correct

Answer B: The increased value created when adjacent parcels are combined (assembled) into one larger parcel

Plottage (or assemblage value) is the increment of value gained when two or more adjacent parcels are combined into a single, larger tract. The combined value often exceeds the sum of the individual parcel values because the larger parcel may support a higher and better use.

Exam Tip: Property Valuation

Valuation questions focus on the three approaches to value: sales comparison, cost, and income. Know which approach is best for which property type. The income approach uses cap rate and NOI — memorize these formulas.

Key Property Valuation Terms in This Question

Appraisal

A professional estimate of a property's market value prepared by a licensed or certified appraiser.

Zoning

Local government regulations that control land use by dividing areas into zones specifying permitted uses, building sizes, and densities.

People Also Study

Key Terms to Know

Zoning

Local government regulations that control land use by dividing areas into zones specifying permitted uses, building sizes, and densities.

Depreciation

A reduction in the value of an improvement (building) over time due to physical deterioration, functional obsolescence, or external factors.

Appraisal

A professional estimate of a property's market value prepared by a licensed or certified appraiser.

Capitalization Rate (Cap Rate)

A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.

Math Concepts

Profit & Loss

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Property Valuation Guide

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