Definitions
Excess Land: The portion of a property that is beyond the amount of land required to support its current highest and best use and could be subdivided and utilized for another purpose. This part of the land may have a different highest and best use compared to the primary portion of the parcel.
Examples
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Highway Frontage Development: A 10-acre parcel with 2,000 feet of frontage along a well-traveled highway is considered for strip development. An appraiser figures that the project will use only part of the land along the highway. The remaining portion, which lacks highway frontage, is not necessary for this commercial purpose. Thus, it can be split off and developed, potentially as a residential subdivision. This leftover area is classified as excess land.
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Urban Plot: In an urban setting, a property of 5 acres supports a boutique retail store but uses only 2 acres for the building and parking. The remaining 3 acres, which are undeveloped, could be utilized for another purpose like office buildings or a small residential complex. These 3 acres are deemed as excess land.
Frequently Asked Questions
What is the key difference between excess land and surplus land?
Excess Land: Can be separated and sold or developed independently to its highest and best use.
Surplus Land: Cannot be separated from the main parcel and usually has limited utility but supports the current use of the primary property.
How do appraisers handle excess land during property valuation?
Appraisers typically assess excess land on its own highest and best use, separate from the main parcel. Its valuation depends on what use will maximize its value independently.
What potential uses qualify excess land?
Potential uses include residential subdivisions, recreational areas, additional commercial developments, or even agricultural purposes, dependent on zoning laws and market feasibility studies.
- Highest and Best Use: The reasonably probable use of property that results in the highest value.
- Sub-Lot (Subdividing): Division of a larger property into smaller lots that can be sold or developed separately.
- Land Valuation: The process of determining the value of a piece of land based on potential usage, location, and market trends.
- Zoning Laws: Legal regulations defining how land can be used, including the types of buildings permitted and the parcel’s allowable use.
Online Resources
- Appraisal Institute: Offers resources and training on various property appraisal methodologies including handling excess land.
- Urban Land Institute: Provides articles and research on land use and urban planning.
- CCIM Institute: A provider of education and resources for commercial real estate professionals.
References
- “The Appraisal of Real Estate” by The Appraisal Institute
- “Real Estate Principles: A Value Approach” by David C. Ling and Wayne R. Archer
Suggested Books for Further Studies
- “Real Estate Development: Principles and Process” by Mike E. Miles
- “Valuation Workbook: Step-by-Step Exercises and Tests to Help You Master Real Estate Appraisal” by C. F. Sirmans and G. K. Turnbull
Real Estate Basics: Excess Land Fundamentals Quiz
### What is one key feature that distinguishes excess land from the primary portion of a property?
- [x] The excess land can be sold or developed independently.
- [ ] The excess land is essential for the convenience of the primary property.
- [ ] Excess land is always used for agricultural purposes.
- [ ] It is smaller in size compared to the main parcel.
> **Explanation:** Excess land differs from the primary portion because it can be sold or developed independently, making it a separate asset with its own highest and best use.
### Can excess land be zoned differently from the main portion of a parcel?
- [x] Yes
- [ ] No
> **Explanation:** Excess land can have a different zoning classification, depending on the local zoning laws and its highest and best use.
### What kind of impact does the designation of excess land have on the property value?
- [x] Increases property value due to potential for separate development.
- [ ] Decreases property value due to wastage.
- [ ] Has no impact on property value.
- [ ] Depends entirely on the property's age.
> **Explanation:** Designating a portion as excess land typically increases the overall value, as it opens up additional opportunities for development or sale.
### Which term is similar to "excess land" but cannot be independently developed or sold?
- [ ] Highest and Best Use Land
- [x] Surplus Land
- [ ] Primary Parcel Land
- [ ] Core Parcel Land
> **Explanation:** Unlike excess land, surplus land is not independently developable or saleable and usually supports the main parcel's current use.
### Which organization would provide valuable resources on appraising properties with excess land?
- [x] The Appraisal Institute
- [ ] The IRS
- [ ] Federal Reserve Bank
- [ ] U.S. Census Bureau
> **Explanation:** The Appraisal Institute provides comprehensive resources and training on appraising various types of properties, including those with excess land.
### In which type of development scenario would excess land be most useful?
- [ ] Historically preserved sites
- [ ] Industrial waste sites
- [x] Suburban residential development
- [ ] Ventures with long-term leases only
> **Explanation:** Suburban residential development frequently leverages excess land, particularly for expanding housing projects or creating new amenities.
### What must be evaluated to accurately appraise excess land?
- [ ] The historical value of neighboring properties
- [x] Its highest and best use independent of the main parcel
- [ ] The lowest possible development cost
- [ ] The remaining lease term on adjacent properties
> **Explanation:** Accurate appraisals must consider the excess land's highest and best use independently, to determine its true value.
### Excess land in a commercial property setting can be utilized for what kind of purpose?
- [ ] Constructing a single-family home only
- [x] Building additional commercial buildings
- [ ] Creating a private garden
- [ ] It cannot be used in commercial settings
> **Explanation:** In a commercial property setting, excess land can be used for additional commercial buildings or parking lots, depending on zoning laws and market needs.
### To qualify as excess land, what must the portion of land be?
- [x] Beyond what is needed for the main property's highest and best use.
- [ ] Requiring significant renovation.
- [ ] Within 100 meters of a highway.
- [ ] Both larger and more valuable than the main parcel.
> **Explanation:** Excess land is precisely defined by being beyond what is necessary to support the main property's highest and best use.
### Can excess land be an asset to an investor?
- [x] Yes, it provides additional development opportunities.
- [ ] No, it does not generate immediate revenue.
- [ ] Only if the land is forested.
- [ ] Only if combined with industrial properties.
> **Explanation:** Excess land can be an asset to an investor because it provides extra development or sale opportunities, thereby potentially increasing investment returns.
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