In an owner-occupant neighborhood, verified market evidence shows buyers compare purchase prices rather than rental yields, and the rental inputs are weak. How should a developed income indication be treated?
Correct Answer
C) Give it little or no weight, explaining its limited relevance.
The stated buyer behavior and weak rental evidence justify limited reliance on income in this assignment. Owner occupancy alone is not a prohibition on developing or relying on an income approach when relevant, reliable rental-market evidence exists. Development does not require equal weight.
Why This Is the Correct Answer
Option C is correct because the stated buyer behavior and weak rental evidence justify little or no reliance on the income indication in this assignment. Guidance says the income approach should not be given great weight when the property's circumstances do not fit its premises. The appraiser should explain the limited relevance and support.
Why the Other Options Are Wrong
Option A: Give it equal weight, since the approach was developed.
Option A gives the income indication equal weight because the approach was developed. Developing an approach does not require equal weight; weight follows relevance and support, and both are weak here.
Option B: Use it alone whenever any rent multiplier can be calculated.
Option B uses income alone whenever any rent multiplier can be calculated. Being able to calculate a multiplier does not make it reliable or relevant, and the facts say rental inputs are weak.
Option D: Give it most weight because other approaches are not mathematical.
Option D gives income most weight because the other approaches are not mathematical. All approaches involve calculation and judgment; mathematical form is not evidence of reliability.
Developed is not decisive
Running an approach earns it a look, not a vote. Its weight depends on relevance and data quality.
How to use: Use this when an option assigns weight because an approach was completed.
Exam Tip
Match the weight to the facts given about buyer behavior and data quality. Do not assume owner occupancy alone bans the income approach.
Common Mistakes to Avoid
- -Giving equal weight to each developed approach by default
- -Treating any calculable rent multiplier as reliable
- -Believing owner occupancy alone prohibits the income approach
Concept Deep Dive
Analysis
This question tests how market behavior and data quality affect the weight of a developed approach. The facts say buyers compare prices rather than rental yields and the rental inputs are weak. Developing an approach does not entitle it to weight; support does.
Background Knowledge
In owner-occupied neighborhoods, buyers typically compare purchase prices, so sales comparison is often most relevant. Owner occupancy alone does not prohibit an income approach when reliable rental-market evidence exists.
Real-World Application
In a suburb of owner-occupied homes with only two questionable rentals, the appraiser develops a gross rent multiplier but gives it little weight, explaining that buyers here compare sale prices and rental data are thin.
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