Property Valuation
An appraiser preparing a value for a NH 4-unit residential property would typically use the income approach as a primary method and the sales comparison approach as:
AThe primary approach, since sales of similar properties are always better
BA secondary support for the income approach value✓ Correct
CIrrelevant for multi-family properties
DThe only approach required by USPAP
Explanation
For small income properties (2–4 units), the income approach may be the primary method if there is a good rental market, but the sales comparison approach using sales of similar small multi-family properties provides important market support. Both approaches should be developed and reconciled in the appraisal.
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Key Terms to Know
Appraisal
A professional estimate of a property's market value prepared by a licensed or certified appraiser.
Comparable Sales (Comps)Recently sold properties similar in size, condition, and location used by appraisers and agents to estimate a property's market value.
Capitalization Rate (Cap Rate)A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
Gross Rent Multiplier (GRM)A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
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