Property ValuationIntermediateCalifornia Exam

What does 'market value' assume about the buyer and seller?

ABoth parties are under pressure to transact quickly, consistent with USPAP appraisal standards, under standard appraisal methodology

BBoth are knowledgeable, acting in their own best interest, not under duress, and the property has been on the market for a reasonable timeCorrect

CThe seller is always motivated to sell below market, per standard California valuation practice, under standard appraisal methodology, consistent with USPAP appraisal standards

DThe buyer always knows more than the seller, under standard appraisal methodology, consistent with USPAP appraisal standards

Why Both are knowledgeable, acting in their own best interest, not under duress, and the property has been on the market for a reasonable time Is Correct

Answer B: Both are knowledgeable, acting in their own best interest, not under duress, and the property has been on the market for a reasonable time

Market value assumes both buyer and seller are typically motivated, knowledgeable about the market, acting prudently, not under undue pressure, and that a reasonable marketing period has occurred. This distinguishes market value from distressed sale prices.

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.

Key Property Valuation Terms in This Question

Appraisal

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

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Key Terms to Know

Appraisal

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

Comparable Sales (Comps)

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

Depreciation

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

Listing Agreement

A contract between a property owner and a real estate broker that authorizes the broker to market and sell the property.

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