How should rent survey data be applied in the income approach?
Correct Answer
A) As market evidence tested against local rentals
Evaluate the survey’s geographic and property coverage, period, sampling, lease terms, rent definitions, and reliability. Compare with suitable rental evidence and subject lease information as available and necessary for credible results. Contract rent and market rent are different concepts and should not be substituted without analysis. A survey’s appropriate weight depends on its quality and assignment fit; there is no universal rule that it can only be secondary evidence.
Why This Is the Correct Answer
Option A is correct because a rent survey is market evidence that should be tested against local rentals and subject lease information as needed for credible results. The appraiser evaluates its geographic and property coverage, period, sampling, lease terms and rent definitions. Its weight then depends on its quality and fit for the assignment.
Why the Other Options Are Wrong
Option B: As a substitute for the subject's actual rent roll
Option B is wrong because it uses the survey as a substitute for the subject's actual rent roll. Contract rent and market rent are different concepts, and one should not replace the other without analysis.
Option C: As a figure requiring no further verification
Option C is wrong because it treats the survey figure as requiring no further verification. A survey must be evaluated for coverage, timing, definitions and reliability before it is relied upon.
Option D: As applicable only to residential property types
Option D is wrong because it limits rent surveys to residential property types. Surveys can cover commercial and other property types, and their usefulness depends on fit with the assignment rather than property category alone.
Survey is a witness
Treat a rent survey like a witness whose story you check against other witnesses, the local rentals and the subject's leases. A witness is heard, tested and weighed, not simply believed.
How to use: Use this when a question asks how much to trust published rent or market survey data.
Exam Tip
Choose the answer that treats published survey data as evidence to be tested, not as a replacement for subject data or an unverified figure.
Common Mistakes to Avoid
- -Substituting survey market rent for the subject's contract rent without analysis
- -Accepting survey figures without checking their rent definitions and period
- -Assuming rent surveys apply only to residential property
Concept Deep Dive
Analysis
This question tests how published rent surveys fit into the income approach. A survey is market evidence whose coverage, period, definitions and reliability must be evaluated and compared with suitable local rental evidence. It neither replaces the subject's actual lease data nor stands as an unverified figure.
Background Knowledge
In the income approach, market rent is estimated from rental evidence, while contract rent is what an actual lease requires. Rent surveys can help estimate market rent but must be evaluated for scope, timing, definitions and reliability.
Real-World Application
An appraiser valuing a small office building finds a regional rent survey reporting average asking rents. Because the survey mixes newer towers with older buildings and uses gross rents, the appraiser compares it with local leases of similar space before concluding market rent.
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