The principle of anticipation is particularly important in California's fast-changing real estate markets. A property near a planned new BART extension station in the East Bay is currently surrounded by older single-family homes, but the city has approved transit-oriented development (TOD) zoning for the area. How does anticipation affect the current value?
Correct Answer
A) The current value already reflects anticipated future benefits
The principle of anticipation states that value is based on expected future benefits, not just current conditions. In California, the approval of TOD zoning and a planned BART extension creates expectations of improved transit access, increased density allowances, and neighborhood transformation. Buyers and investors price these anticipated benefits into current property values, often well before the improvements are completed.
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Example of economic obsolescence in real estate?
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Return of an investor’s investment is provided for through:
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?
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- → The appraisal approach that estimates value by comparing a property to similar recently sold properties is the:
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- → 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.
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