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28 August, 16:10

A site is improved with a single-family residence. If vacant, the value of the site for a residential use would be $100,000. However, the site is zoned so that a commercial use is allowed, and if vacant, it would sell as commercial property for $160,000. The cost of demolishing the existing structure is $20,000. What is the value of the property as improved for commercial use?

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  1. 28 August, 16:28
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    Value of property = $140,000

    Explanation:

    If there were no commercial use of the site, it would have a value of $100000. But due to the site being zoned which allows it to be used for commercial purposes will have a value of $160000. But in order to make it available for commercial use, the existing structure has to be demolished which will cost $20000. Therefore, the value of property as improved for commercial use would be the net of sale value and costs incurred to make it available for sale. Calculation is as follows:

    Sale value = $160,000

    Costs to sell = (-$20,000)

    Net value = $140,000
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