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?
Correct Answer
C) Make a downward adjustment to the comparable's sale price to account for the subject property's additional Mello-Roos tax burden
In California, properties within a Mello-Roos Community Facilities District carry an additional tax burden that buyers consider when determining how much they are willing to pay. Since Comparable #1 does not carry this burden, its price reflects a property free of Mello-Roos taxes. To make it comparable to the subject (which has Mello-Roos), a downward adjustment is appropriate because buyers typically pay less for properties with higher ongoing tax obligations.
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Related Concepts
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.
Closing costs are the fees and expenses paid by the buyer and seller at the closing of a real estate transaction, beyond the purchase price. They typically range from 2-5% of the purchase price.
A conventional loan is a mortgage that is not insured or guaranteed by a government agency such as the FHA, VA, or USDA. It is originated and funded by private lenders and may be conforming or non-conforming.
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Previous Question
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?
Next Question
An appraiser in Orange County, California is adjusting a comparable sale for a CMA. The comparable sold for $820,000 and has 1,800 sq ft. The subject property has 2,100 sq ft. The appraiser determines that the market-derived adjustment is $200 per square foot in this California market. The comparable also has a pool (valued at $25,000) that the subject lacks. What is the adjusted value of the comparable?