California Real Estate Practice Exam

"Just compensation" is a term used in condemnation proceedings. In determining the fair market value of a property, the court would use any of the following, except the:

1. Comparative income data approach

2. Cost approach

3. Income approach

4. Market data approach

The correct answer is: Comparative income data approach

"Just compensation" refers to the requirement that a property owner must be compensated fairly when their property is taken for public use under eminent domain laws. The court relies on various approaches to determine the fair market value of the property, utilizing recognized appraisal methodologies to reach a just and equitable figure. The comparative income data approach generally is not used directly in determining fair market value, particularly in condemnation proceedings. This approach may involve assessing income based on comparison to similar properties' income-generating potential; however, it's less common as a standalone method in eminent domain cases, where traditional approaches like the cost, income, and market data approaches are more directly focused on establishing a property's value based on observable market conditions, potential income, or reproduction costs. The cost approach calculates the value of a property based on the cost to replace or reproduce it, minus depreciation. The income approach estimates value based on the income the property is expected to generate, while the market data approach looks at recent sales of comparable properties to establish a value. Each of these approaches has a clear application in evaluating property value in a legal context, making them more relevant than the comparative income data approach in this scenario.