Property Valuation
In a seller's market, cap rates for investment properties tend to:
AIncrease as competition rises
BCompress (decrease) as buyers pay more for properties, reducing the income yield✓ Correct
CRemain constant
DIncrease to reflect higher risk
Explanation
In a seller's market, high demand drives prices up. As sale prices increase relative to NOI, cap rates compress (decrease), reflecting lower income yields per dollar invested.
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