Which of the following is true about the GRM method?

The GRM, or Gross Rent Multiplier, method is a tool used in real estate appraisal to estimate the value of income-producing properties based on their rental income. The method involves multiplying the gross annual rental income of a property by a GRM derived from comparable properties to arrive at an estimated value.

Choosing the statement that the method can't be used alone as an indication of value for residential property is accurate because the GRM is typically used as a preliminary valuation tool. It is important to combine this method with other valuation techniques and factors, such as market trends, property condition, location, and comparable sales data, to ensure a more comprehensive and accurate appraisal. Real estate appraisers recognize that relying solely on the GRM may overlook these crucial aspects and lead to a skewed valuation.

In assessing this option, it is evident that the GRM provides a starting point but should not be the sole basis for determining value. This multifaceted approach helps ensure that the appraisal reflects current market conditions and property specifics, leading to more reliable and credible valuations.