External obsolescence measured through capitalized rent loss requires:
Correct Answer
B) A supported rent difference and an appropriate rate
Why this is correct: To quantify external obsolescence via the income method, you need two supported inputs: 1) The annual rent loss attributable to the external condition (the difference between market rent without the problem and actual or potential rent with it), and 2) An appropriate capitalization rate to convert that annual loss into a lump-sum value deduction. Why the other choices are wrong: Original cost records are for the cost approach, not measuring rent loss. A tax schedule is for accounting, not market valuation. A tenant statement may be anecdotal; market support is needed. Exam tip: External obsolescence is often measured by capitalizing the income loss: (Rent Loss) / (Cap Rate) = Value Loss.
Why This Is the Correct Answer
Why this is correct: To quantify external obsolescence via the income method, you need two supported inputs: 1) The annual rent loss attributable to the external condition (the difference between market rent without the problem and actual or potential rent with it), and 2) An appropriate capitalization rate to convert that annual loss into a lump-sum value deduction. Why the other choices are wrong: Original cost records are for the cost approach, not measuring rent loss. A tax schedule is for accounting, not market valuation. A tenant statement may be anecdotal; market support is needed. Exam tip: External obsolescence is often measured by capitalizing the income loss: (Rent Loss) / (Cap Rate) = Value Loss.
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