Why does the income approach normally carry most weight for an apartment building?
Correct Answer
B) Buyers of such property price it on its income
Why this is correct: For income-producing property like an apartment building, typical market participants (investors) base their purchase decisions primarily on the property's income-generating potential. Therefore, the income approach best reflects market behavior and receives the most weight. Why the other choices are wrong: Ease of data collection is not a valid reason for weighting. The cost approach can be applied to apartments. Lender requirements do not dictate the appraiser's reconciliation judgment. Exam tip: Weight the approach that best mirrors how the typical buyer for that property type makes decisions.
Why This Is the Correct Answer
Why this is correct: For income-producing property like an apartment building, typical market participants (investors) base their purchase decisions primarily on the property's income-generating potential. Therefore, the income approach best reflects market behavior and receives the most weight. Why the other choices are wrong: Ease of data collection is not a valid reason for weighting. The cost approach can be applied to apartments. Lender requirements do not dictate the appraiser's reconciliation judgment. Exam tip: Weight the approach that best mirrors how the typical buyer for that property type makes decisions.
More Reconciliation Questions
Reconciliation of the approaches to value is best described as which activity?
Why should the reconciliation address the quantity of evidence as well as its quality?
How long must a report be retained compared with the workfile?
What distinguishes an appraisal review from an appraisal?
An appraiser reconciles to a value at the top of the indicated range because the client needs that figure. What has occurred?
What does it mean that a value opinion must be reasonable rather than merely arithmetically derived?
What should the reconciliation section explain to the reader?
How do the content obligations of the two report options differ with respect to the information analyzed?
The three approaches indicate $480,000, $495,000 and $610,000. What should the appraiser do first?
Three approaches indicate $1.02 million, $1.05 million and $1.04 million. How should this be reported?
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