A California real estate licensee is preparing a CMA and notices that one comparable property sold in a foreclosure auction conducted by a trustee under a deed of trust. How should this sale be handled in the CMA?
Correct Answer
A) Exclude it or clearly identify it as a distressed sale that may not reflect market value
In California, a trustee's sale under a deed of trust (California Civil Code §2924) is a non-judicial foreclosure where the property is sold 'as-is' with no warranties. These are considered distressed sales and typically sell below market value. Under USPAP and California appraisal practice, such sales should either be excluded from the CMA or clearly identified as distressed with appropriate qualifications.
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:
More Property Valuation Financial Analysis Questions
Example of economic obsolescence in real estate?
Which appraisal report type do California lenders commonly rely on for single-family residence financing?
Return of an investor’s investment is provided for through:
All of the following are one of the four important elements of value, except:
Which of the following is the least important factor used to determine the market value of a property?
- → A 4-unit apartment building in Sacramento has monthly rents of $1,500 per unit. The submarket vacancy rate is 5%. Annual operating expenses are $28,800. The prevailing cap rate for comparable properties is 6%. Using the income approach, what is the estimated value of the property?
- → Under California law, when a real estate licensee prepares a Comparative Market Analysis (CMA) for a property, what is the legal distinction between a CMA and a formal appraisal?
- → Owner converted master bedroom into 'granny flat' costing $50,000 but adding $30,000 value. Later, kitchen remodel cost $15,000 but added $20,000 value. Which statement is correct?
- → 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:
- → 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?
- → 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 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?
- → 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?
- → 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?
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
Previous Question
Under California Revenue and Taxation Code, which of the following transfers is EXCLUDED from the definition of 'change in ownership' and does NOT trigger a property tax reassessment?
Next Question
In the California real estate market, an agent is explaining the sales comparison approach to a seller. The agent states that adjustments are always made to the comparable properties, not to the subject property. Why is this the standard practice in California?