Question

A residential property is being purchased for $220,000. The improvements constitute a legal non-conforming use, as the zoning was changed several years ago to permit a higher density of single family use. As a consequence, the demand for vacant sites has increased significantly and site values have increased dramatically. Were it to be vacant, the subject site would be worth $285,000. The cost of demolition is $28,000. What, if any, profit would result from the demolition of the improvements?

Answer 1

Answer:To calculate the profit from the demolition of the improvements, we need to subtract the cost of demolition from the difference in the value of the property with and without the improvements.

Difference in value = $285,000 (value as vacant site) - $220,000 (purchase price) = $65,000

Profit = $65,000 - $28,000 (cost of demolition) = $37,000

So, there would be a profit of $37,000 from the demolition of the improvements.

Explanation:To calculate the profit from the demolition of the improvements, we need to subtract the cost of demolition from the difference in the value of the property with and without the improvements.

Difference in value = $285,000 (value as vacant site) - $220,000 (purchase price) = $65,000

Profit = $65,000 - $28,000 (cost of demolition) = $37,000

So, there would be a profit of $37,000 from the demolition of the improvements.