My original training in real property valuation was as a rights-of-way appraiser for a state highway department. The instruction for this job repeatedly stressed the principle of giving the property owner the benefit of the doubt in all matters involving compensation for property rights acquired.
The “benefit of the doubt” principle has solid application in mass appraisal, where we are all careful to ensure the property owner is equitably treated. This means:
- Estimate market rent based on what is locally achievable, rather than aspirational.
- Always include vacancy allocation that is locally supported, even if the property is the best in the submarket.
- Base expenses on submarket performance rather than on general or broad allotments by property sector.
- Derive capitalization rates locally rather than using national survey data.
So to the extent you err from perfect, “err fair” and point any benefit toward the property owner.