Property Valuation
A Texas appraiser determines a capitalization rate using market extraction. This process involves:
AApplying a formula from the appraiser's textbook
BDividing the NOI of recently sold comparable properties by their sale prices to derive a market cap rate✓ Correct
CContacting the county appraisal district for the rate
DUsing the lender's required minimum return
Explanation
Market extraction (derivation) calculates cap rates from market data: for each comparable sale, Cap Rate = NOI ÷ Sale Price. Analyzing multiple sales produces a range of market cap rates that the appraiser can apply to the subject property.
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