Property ValuationIntermediateCalifornia Exam

When a property is over-improved relative to its neighborhood, the excess value added by the improvement is called:

AContribution

BPlottage

CSuperadequacyCorrect

DAssemblage

Why Superadequacy Is Correct

Answer C: Superadequacy

Superadequacy (also called over-improvement) occurs when an improvement adds more value than can be recouped in the market because it exceeds what the typical buyer in that area expects or will pay for. It represents a form of functional obsolescence.

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

Depreciation

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

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.

Capitalization Rate (Cap Rate)

A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.

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