An appraiser is using sale price per square foot as a unit of comparison for a vacant commercial lot. The subject property is 2 acres. One of the appraiser's comparable sales is 0.3 acre; another comparable sale is 6 acres. What should the appraiser consider at this point?

• A. Economies of scale
• B. Zoning compatibility
• C. Location difference
• D. Building age

Answer: (A)

When valuing land, the size of the parcel can affect the per-unit price in ways that aren’t perfectly linear. Economies of scale means that as parcel size changes, the value per square foot doesn’t move in a straight line. Very small lots can command a higher per-square-foot price due to demand for flexibility or niche buyers, while much larger parcels may have a lower per-square-foot value because the extra land isn’t as easily developable or marketable.

With the subject at 2 acres and comparables at 0.3 acres and 6 acres, you should consider the impact of scale on the price-per-square-foot comparison. The appropriate step is to adjust for size effects or convert values to a common unit (such as per acre) to ensure a fair comparison. This helps prevent distortions caused by the large disparity in parcel sizes.

Zoning compatibility and location differences are factors to consider in appraisal, but the immediate issue here is how parcel size affects unit value. Building age isn’t applicable to vacant land.