A real estate agent in Los Angeles is preparing a Comparative Market Analysis (CMA) for a single-family home in a neighborhood subject to Proposition 13 tax assessments. When selecting comparable sales, what is the MOST important factor the agent should consider regarding property taxes?
Correct Answer
D) The actual sale price of each comparable rather than the Prop 13 assessed value
In California, Proposition 13 limits assessed values to the base year value plus a maximum 2% annual increase, so the county-assessed value often does not reflect market value. When preparing a CMA, the agent must use actual sale prices of comparable properties, as these reflect true market value rather than the artificially constrained Prop 13 assessed values.
Why This Is the Correct Answer
Why the Other Options Are Wrong
Deep Analysis of This Property Valuation Financial Analysis Question
Background Knowledge for Property Valuation Financial Analysis
Real World Application in Property Valuation Financial Analysis
Common Mistakes to Avoid on Property Valuation Financial Analysis Questions
Related Topics & Key Terms
Key Terms:
Related Concepts
Usury is the practice of charging an interest rate that exceeds the maximum rate permitted by state law. Usury laws protect borrowers from excessive interest charges on loans.
A VA loan is a mortgage guaranteed by the Department of Veterans Affairs available to eligible veterans, active-duty service members, and surviving spouses. It offers no down payment and no private mortgage insurance requirements.
An adjustable-rate mortgage (ARM) has an interest rate that changes periodically based on market conditions, typically after an initial fixed-rate period. The rate adjustment is tied to a financial index plus a margin.
More Property Valuation Financial Analysis Questions
Return of an investor’s investment is provided for through:
A licensed appraiser in California is appraising a home in a subdivision where half the homes are within a Mello-Roos Community Facilities District and half are not. The subject property is within the Mello-Roos district and pays $3,200 annually in special taxes. When selecting comparables, which approach is MOST appropriate under California appraisal standards?
A California real estate agent explains to an investor that the Gross Rent Multiplier (GRM) is a simplified method of property valuation. Compared to the capitalization rate method, what is the main limitation of the GRM approach in the California market?
When conducting a sales comparison analysis in California, an appraiser discovers that the subject property has an Accessory Dwelling Unit (ADU) that was built under California's recent ADU legislation. How should the appraiser handle this feature?
The appraisal approach that estimates value by comparing a property to similar recently sold properties is the:
- → The period of time a structure continues to earn sufficient income to continue operations is referred to as the structure’s:
- → A California real estate agent is selecting comparable sales for a CMA on a property in Fresno. The agent finds a sale from 14 months ago in the same neighborhood. Under standard California CMA practice, why might the agent hesitate to use this comparable?
- → An appraiser in California is using the cost approach for a property in Sacramento and must account for entrepreneurial profit (also called developer's profit). A local developer confirms that typical profit margins in the Sacramento market are 15-20% of total development costs. How should the appraiser handle entrepreneurial profit?
- → An appraiser views the addition of an amenity to an apartment building under which appraisal principle?
- → Which of the four factors of value (DUST) does zoning law most directly affect?
- → An important characteristic of land is that it may be modified or improved. Such improvements tend to increase the value of real estate. Which of the following is NOT an improvement?
- → A property is located in both a CAL FIRE-designated State Responsibility Area and a Very High Fire Hazard Severity Zone. Which of the following BEST describes how these designations affect property value?
- → A California buyer's agent is reviewing comparable sales data and notices that the county recorder's office lists different documentary transfer tax amounts for similar properties in the same city. Some properties show both a county and city transfer tax, while others show only the county tax. What does this difference indicate about the sale verification process?
- → When calculating Net Operating Income (NOI) for the income approach in California, all of the following are deducted as operating expenses EXCEPT:
- → A married couple in California divorces, and one spouse receives the family home as part of the divorce settlement. Under Proposition 13, what happens to the property's assessed value?
People Also Study
Buyer Representation Agreement
8% of exam
Property Ownership
10% of exam
Land Use Controls and Regulations
8% of exam
Valuation and Market Analysis
10% of exam
Related Articles
Property Flyer Generator — 2026 Guide for U.S. Agents: Step-by-Step + Best Practices
Learn how Property Flyer Generator works and how U.S. real estate agents use it in 2026. Includes setup steps, practical examples, and best-practice tips.
Real Estate Exam Property Ownership & Title (2026): Deeds, Liens, Encumbrances + Practice Questions
Understand deeds, liens, encumbrances, and ownership types with exam-style practice questions and traps.
Property Landing Page — 2026 U.S. Agent Guide: Setup, Use Cases & Pro Tips
Learn how Property Landing Page works and how U.S. real estate agents use it in 2026. Includes setup steps, practical examples, and best-practice tips.
Previous Question
Broker Juan lists a house for 11 months without selling it. Broker Juan is aware the building needs major structural repairs and is listed at 10% above its fair market value. Broker Juan runs an advertisement in a newspaper stating, “Three bedroom, Adobe. The price will amaze! Move-in ready and turnkey condition. Call Broker Juan today!” This advertisement is improper since:
Next Question
An appraiser in San Diego is using the sales comparison approach to value a property in a Mello-Roos Community Facilities District. Comparable #1, located outside the Mello-Roos district, sold for $750,000. Under California appraisal practice, how should the appraiser handle this comparable?