Property Valuation
In Texas, the 'market extraction method' for determining an appropriate overall capitalization rate involves:
AUsing a government-published cap rate for the property's area
BAnalyzing recent comparable sales by dividing each sale's NOI by its sale price to derive market cap rates✓ Correct
CConsulting with a TREC-certified rate setter
DUsing only the published interest rate on 10-year Treasury bonds
Explanation
The market extraction (or direct capitalization from market) method derives cap rates by analyzing comparable sales of income-producing properties, dividing each property's NOI by its sale price, and analyzing the resulting cap rates. This market-derived cap rate is then applied to the subject property's NOI to estimate value.
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