Property Valuation
In the income approach to value, the capitalization rate is derived from:
AThe borrower's desired return on investment only
BMarket evidence of rates buyers and sellers are accepting in recent comparable sales✓ Correct
CGovernment-set tables for each property type
DThe Federal Reserve's discount rate
Explanation
Cap rates are market-derived — they are extracted from recent comparable sales of income-producing properties by dividing their NOI by their sale price. Appraisers look at the market to determine appropriate cap rates.
Related Washington Property Valuation Questions
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