Property Valuation
A West Virginia appraiser is performing an appraisal using the income approach for a small apartment building. The appraiser determines the stabilized occupancy is 93%. This means the appraiser is using:
AMarket rent at 93% of the current contract rents
BA 7% vacancy and credit loss factor rather than the actual current vacancy✓ Correct
COnly 93 of the 100 units in estimating income
DAn occupancy level lower than normal for the property
Explanation
Stabilized occupancy reflects the expected long-term typical occupancy level for the property type and market area, not a momentary high or low. A 93% stabilized occupancy means the appraiser applies a 7% vacancy and credit loss to the potential gross income.
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Key Terms to Know
Appraisal
A professional estimate of a property's market value prepared by a licensed or certified appraiser.
Gross Rent Multiplier (GRM)A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
Listing AgreementA contract between a property owner and a real estate broker that authorizes the broker to market and sell the property.
Debt-to-Income Ratio (DTI)A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
Math Concepts
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