A California property was purchased in 2020 for $750,000. In 2023, the owner completed a permitted ADU, which the county assessor valued at $200,000 upon completion. The owner sells the property in 2026. Under Proposition 13, which of the following best describes how the assessed value is calculated at the time of sale?
Correct Answer
A) The original structure is assessed at its 2020 base value increased by up to 2% per year through 2026, and the ADU is assessed at its 2023 base value increased by up to 2% per year through 2026, with both components added together
Under Proposition 13 (California Constitution, Article XIII A) and Revenue & Taxation Code §51, a property's assessed value is set at its base year value upon acquisition and may increase by no more than 2% per year. When new construction is completed, only the newly constructed portion receives a new base year value assessed by the county assessor at that time — it does not trigger reassessment of the existing structure. The two components are then tracked separately, each subject to the 2% annual cap from their respective base years. For this property: the original structure's base year value of $750,000 (set in 2020) increases at up to 2% annually through 2026 — approximately $750,000 × (1.02)^6 ≈ $844,000. The ADU's base year value of $200,000 (set in 2023) increases at up to 2% annually through 2026 — approximately $200,000 × (1.02)^3 ≈ $212,000. Total assessed value at sale ≈ $1,056,000. This two-component tracking is the correct Proposition 13 treatment.
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Related Topics & Key Terms
Key Terms:
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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.
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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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