BOE Appraiser Exam Prep

Exempt Property

Property owned by the state.

Exempt Property

Fruit and nut trees until 4 years after planting.

Exempt Property

Grape vines until 3 years after planting.

Proposition 13 (1978)

A California state ballot initiative capped the state's real estate tax at 1 percent of assessed value and rolled back base year values to the 1975 market value.

Proposition 8

When there is a decline in value, the assessor is required to enroll either the property's factored base year value or the current market value, whichever is lower.

Taxable Property

All property, real or personal, that a private party can own.

Real Property

Land, mines, minerals, and quarries in the land, all standing timber whether or not it belongs to the land owner, buildings, structures, fixtures, and fences on or affixed to the land, fruit, nut, and ornamental trees and vines.

Personal Property

All property not defined as real property, not subject to Proposition 13 or special assessments.

Ad Valorem Tax

A tax levied according to value, on real and personal property.

1%

The maximum ad valorem tax.

Full Cash Value

The appraised value of real property at the time of new construction or change in ownership.

2%

Maximum inflationary tax rate.

Fair Market Value

The price negotiated for real estate in a competitive market where both buyer and seller are under no pressure.

Low Value Ordinance

Exempts property when the total assessed value is less than $10,000.

Utility

The capacity of a good or service to be functional and give satisfaction to someone—the first prerequisite to value.

Scarcity

To have value, a good must require time and effort to obtain, and if in short supply, it is necessary to economize on its use—the second prerequisite to value.

Capacity for Private Ownership

Before a good can have value, it must be available for private ownership—the third prerequisite to value.

Demand or Effective Purchasing Power

People must be ready, willing, and able to purchase a good at a price—the fourth prerequisite to value.

Exempt Property

Property owned by local government.

Exempt Property

Property owned by non-profit organizations, like libraries, museums, public schools, colleges, and religious organizations.

Exempt Property

Growing crops.

Market Value

Also known as value in exchange, it is the power of a product to command other products in exchange.

Supply and Demand

The amount of a commodity, product, or service available and the desire of buyers to obtain it, considered as factors determining value.

Use Value

The value of a property based on the future uses anticipated by its owner.

Value

The present worth of future benefits.

Fair Market Value

The price, in cash or cash equivalent, negotiated for real estate in a competitive, open market.

Rule 2

Price equals value unless an overwhelming amount of evidence points to the contrary.

Appraisal Unit

The property that people in the market typically buy and sell as a unit, considering the highest and best use when.

Principle of Unit Valuation

Value accrues to assets because of their ability to generate benefits as a whole group.

Property

Ownership rights in land or goods that are guaranteed and protected by government.

Ownership

The collection of rights to use and enjoy property, including the right to transfer it to others.

Fixture

An item of personal property that has been converted to real property by being permanently affixed to the realty.

Possessory Interest

A right to possess or use publicly owned real property.

Fee Simple Estate

Highest and most complete form of ownership. It is subject only to limitations imposed by government.

Police Power

Limits property for health and safety issues, and zoning.

Taxation

The power of the state to tax property.

Eminient Domain

Power of a government to take private property for public use.

Escheat

Unclaimed property, usually from a death, passes to the state.

Leasehold Estate

Right of possession, subject to the terms of the lease and for the duration specified in the lease. The landlord retains all the other ownership rights as well as the right of reversion (regain possession).

Easement

A limited right to make use of a property owned by another.

Dominant Estate

The parcel in an easement appurtenant which benefits from the easement.

Servient Estate

A parcel of land over which an easement runs.

Deed Restrictions

Conditions and covenants made by property owners to restrict the use of property.

Geographic Market

Neighborhoods, school districts, and landmarks.

Property Type Market

Residential, commercial, industrial, and rural.

Physical Forces

Views, topography, and landmarks.

Demographic Forces

Aging population, income levels, and family size.

Economic Forces

Interest rates, inflation, unemployment, and financing availability.

Governmental Forces

Police, public utilities, fire protection, transportation, and zoning.

Highest and Best Use

The use of a property found to be (1) legally permissible, (2) physically possible, (3) financially feasible, and (4) most productive.

Excess Land Principle

Separately marketable and possesses significant utility and value. Identified and appraised separately.

Surplus Land Principle

Does not economically support the existing improvements and cannot expand the current use or be sold separately.

Balance Principle

Real property value is created and continues when opposing or interacting elements are in a state of equilibrium. Internal and external elements must be in balance.

Contribution Principle

Applies the principle of balance to each property component. The value of a. property component is measure in terms of its contribution to the value of the whole property.

Land Agent of Production

The ground, airspace, and natural resources found on the surface or sub-surface of the earth.

Labor Agent of Production

The human work of production.

Capital Agent of Production

Goods and intangible assets and rights used in production.

Entrepreneurship Agent of Production

Act of visualizing needs and taking necessary action and risks to produce products to fulfill those needs.

Economic Balance

When the four agents of production - land, labor, capital, and entrepreneurship - are in balance, maximum value is attained.

Increasing and Decreasing Returns

Adding agents of production will produce greater net income (increasing). The continued contribution of agents of production will produce lower net income (decreasing). The proper combination will result in the highest and best use.

Principle of Substitution

The maximum value of a property tends to be set by the cost of purchasing an equally desirable substitute property. Fundamental to the three approaches to value.

Conformity

Maximum value accrues to a property when there is a reasonable amount of accord in the neighborhood or surrounding land. The highest and best use is realized when there is harmony.

Principle of Regression

Higher-value homes tend to decrease in value when close to lower-value homes.

Principle of Progression

Lower-value homes tend to benefit or increase in value when close to higher-value homes.

Four Stages of Change in the Real Estate Market

Acceptance, stability, decline, and redevelopment.

Principle of Externalities

The influences outside of a property can have a positive or negative affect on its value.

Plottage

The increase in value or utility resulting from the assemblage of two or more adjacent lots into one larger lot.

Assemblage

The combining of two or more adjoining lots into one larger.

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