Property Valuation
In New Jersey, when appraising an income property, a 'vacancy and collection loss' deduction is applied because:
AAll units are assumed always vacant
BA realistic appraisal must account for the fact that units will not always be occupied and some rent may not be collected✓ Correct
COnly properties with existing vacancies receive this deduction
DIt is required by the IRS
Explanation
Vacancy and collection loss is a market-based deduction from potential gross income that accounts for the fact that no property maintains 100% occupancy and that some rent may not be collectible. The deduction is based on market data for similar properties in the NJ submarket.
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