California DRE Salesperson Exam
Property Valuation & Financial Analysis
This module covers 14% of the California DRE Salesperson exam, about 21 questions. Master the three appraisal approaches, principles of value, depreciation, and income property analysis.
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Property Valuation & Financial Analysis
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Key concepts
Three approaches to value
Sales comparison (homes), cost approach (unique buildings), income approach (investment property). All three used, then reconciled.
Principle of substitution
A buyer will not pay more than the cost of an equally desirable substitute. The foundation of all appraisal.
Three types of depreciation
Physical deterioration (wear), functional obsolescence (bad design), external obsolescence (outside factors, always incurable).
Income approach formula
Value = NOI / Cap Rate. NOI = Effective Gross Income minus operating expenses. Higher cap rate = lower value.
CMA vs appraisal
CMA by agent for pricing. Appraisal by licensed appraiser following USPAP, required for lending.
Reconciliation
Final appraisal step. Appraiser weighs all approaches based on reliability for that property type.
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