Property ValuationIntermediateCalifornia Exam

What is 'assessed value' and how does it relate to market value in California?

AThey are the same; the county uses market value for taxes

BAssessed value is the value set by the county assessor for property tax purposes; in California, it is generally based on purchase price (under Prop 13), not current market valueCorrect

CAssessed value is always higher than market value

DAssessed value is set by the DRE

Why Assessed value is the value set by the county assessor for property tax purposes; in California, it is generally based on purchase price (under Prop 13), not current market value Is Correct

Answer B: Assessed value is the value set by the county assessor for property tax purposes; in California, it is generally based on purchase price (under Prop 13), not current market value

Under California's Proposition 13 (1978), assessed value is based on the property's purchase price and can only increase by a maximum of 2% per year (plus CPI). This often results in assessed values significantly below current market values for long-held properties.

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.