A California appraiser is valuing a rental property that recently added a legally permitted ADU under Government Code §65852.2. The ADU generates $1,800/month in additional rental income. However, the county assessor has not yet reassessed the property to include the ADU improvement value. Under the income approach, how should the appraiser handle this situation?
Correct Answer
B) Include the ADU income and estimate the post-reassessment property tax that will result from the ADU addition as a stabilized operating expense
The income approach should reflect stabilized income and expenses. Since the ADU generates real income ($1,800/month), it must be included in the analysis. However, the operating expenses should also be stabilized to include the expected increase in property taxes once the county assessor reassesses the property to account for the ADU improvement value. Using the pre-ADU tax would understate expenses.
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- → 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 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?
- → Compared to other appraisal factors, appraisers generally find the the most difficult calculation to measure precisely.
- → When a comparable sale used in an appraisal was not an arm’s length transaction, this affects the:
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