Property Valuation
In the income approach, what does 'vacancy and collection loss' represent?
AThe cost of repairing vacant units
BAn estimate of lost rental income from unoccupied units and uncollected rents, deducted from potential gross income to yield effective gross income✓ Correct
CThe cost of collecting rent from tenants
DThe loss from property value decline during vacancies
Explanation
Vacancy and collection loss represents estimated income that won't be realized due to vacant units, tenant turnover, and uncollected rents. It is expressed as a percentage of Potential Gross Income (PGI) and deducted to arrive at Effective Gross Income (EGI). Appraisers determine this figure from market data on typical vacancies for comparable property types in the Oregon market.
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