Under California real estate law, what is the definition of 'market value' as used in appraisals?
Correct Answer
A) The most probable price a property should bring in a competitive and open market under all conditions requisite to a fair sale
Market value, as defined by USPAP and used in California appraisals, is the most probable price a property should bring in a competitive and open market, under conditions requisite to a fair sale. Key assumptions include: buyer and seller are typically motivated, both are well-informed, a reasonable time is allowed for exposure, payment is in cash or equivalent, and the price is not affected by special financing or undue stimulus.
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Related Topics & Key Terms
Key Terms:
Related Concepts
The secondary mortgage market is where existing mortgage loans are bought and sold between lenders, investors, and government-sponsored enterprises (GSEs) like Fannie Mae, Freddie Mac, and Ginnie Mae.
TILA is a federal law that requires lenders to disclose the true cost of credit to borrowers, including the annual percentage rate (APR), total finance charges, and loan terms. It is implemented by Regulation Z.
A trustee sale is a type of foreclosure where a trustee, appointed under a deed of trust, sells the property at auction to satisfy the debt.
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:
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 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:
- → A property’s cost basis is most affected by an owner’s:
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