California Real Estate Practice Exam

In determining today's value of a single-family residence built in 1930, an appraiser would most likely:

1. Draw a conclusion from comparable sales figures in 1930

2. Refer to a cost index and adjust for changes over the years

3. Use 1930 construction costs as a starting point for his calculations

4. Use today's replacement costs and adjust for depreciation accordingly

The correct answer is: Draw a conclusion from comparable sales figures in 1930

The most appropriate approach for determining the current value of a single-family residence built in 1930 involves using today's replacement costs and adjusting for depreciation accordingly. This method takes into consideration the current market conditions, construction costs, and the age of the property. This approach is advantageous because it reflects the modern values and economic factors that are essential for an accurate appraisal in today's market. Appraisers typically assess what it would cost to replace the property with a similar new one, factoring in depreciation to account for the wear and tear, outdated features, and any renovations or improvements that may have been made. This aligns with standard appraisal practices, which prioritize current market conditions while acknowledging the historical context of the property. For context, relying on comparable sales figures from 1930 would not provide a relevant or accurate assessment since the real estate market and economic conditions have shifted significantly since then. Referring to a cost index without adjusting for depreciation would overlook the decline in value of the original structure over time. Using 1930 construction costs as a starting point lacks validity, as those numbers do not accurately represent current costs or market value.