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, under standard appraisal methodology, consistent with USPAP appraisal standards

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, as typically applied in a comparative market analysis, under standard appraisal methodology, consistent with USPAP appraisal standards

DAssessed value is set by the DRE, consistent with USPAP appraisal standards, under standard appraisal methodology

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.

Key Property Valuation Terms in This Question

Appraisal

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

People Also Study

Key Terms to Know

Appraisal

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

Gross Rent Multiplier (GRM)

A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.

Comparable Sales (Comps)

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

Option Contract

A contract giving the buyer the right, but not the obligation, to purchase a property at a specified price within a specified time period.

Math Concepts

Property Tax Assessment

State-Specific Concepts

DRE Regulation

Study This Topic

Property Valuation Guide

Practice More California Real Estate Questions

1,500+ questions covering all exam topics. Start free — no signup required.

Take the Free California Quiz →