Property ValuationIntermediateCalifornia Exam

Which of the following factors does NOT directly affect a property's market value?

ALocation and neighborhood quality

BPhysical condition and size of improvements

CThe seller's original purchase price paid 10 years agoCorrect

DCurrent supply and demand in the local market

Why The seller's original purchase price paid 10 years ago Is Correct

Answer C: The seller's original purchase price paid 10 years ago

Market value is based on current market conditions, not historical cost. The seller's original purchase price is irrelevant to current market value — a property is worth what the market will bear today, regardless of what was paid years ago.

Exam Tip: Property Valuation

Valuation questions focus on the three approaches to value: sales comparison, cost, and income. Know which approach is best for which property type. The income approach uses cap rate and NOI — memorize these formulas.

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Key Terms to Know

Comparable Sales (Comps)

Recently sold properties similar in size, condition, and location used by appraisers and agents to estimate a property's market value.

Appraisal

A professional estimate of a property's market value prepared by a licensed or certified appraiser.

Depreciation

A reduction in the value of an improvement (building) over time due to physical deterioration, functional obsolescence, or external factors.

Contingency

A condition in a purchase contract that must be satisfied before the sale can proceed to closing.

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Property Valuation Guide

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