When estimating the market-derived vacancy and collection loss rate for a stabilized income property, an appraiser should rely primarily on:
Correct Answer
C) an analysis of competing properties' historical and projected rates, reflecting market norms.
Correct. The appropriate vacancy and collection loss rate for a market value appraisal is a forward-looking, stabilized estimate derived from the market. This requires analyzing comparable properties and market studies to understand typical rates for the property type in its competitive market area. Historical data for the subject may reflect atypical management or market conditions and should be adjusted to a market norm. Published metropolitan rates are often too broad and not property-specific.
Why This Is the Correct Answer
Correct. The appropriate vacancy and collection loss rate for a market value appraisal is a forward-looking, stabilized estimate derived from the market. This requires analyzing comparable properties and market studies to understand typical rates for the property type in its competitive market area. Historical data for the subject may reflect atypical management or market conditions and should be adjusted to a market norm. Published metropolitan rates are often too broad and not property-specific.
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Previous Question
An appraiser is analyzing a 20-unit apartment building. Market rent is $1,500 per unit per month. The appraiser identifies three comparables with the following characteristics: Comp 1: 22 units, 5% vacancy, 0.5% collection loss. Comp 2: 18 units, 7% vacancy, 1% collection loss. Comp 3: 25 units, 6% vacancy, no separate collection loss data. What is the market-indicated potential gross income and the appropriate stabilized vacancy and collection loss percentage for the subject?
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Which is not an operating expense for NOI purposes?