Many advertised cap rates on properties being marketed are overstated because income is overstated or expenses are understated, but this is not because there is anything wrong with how cap rates are calculated.  

Understating vacancy is one way that sellers use to do both at once.

Since the rehab numbers are typically understated, the buyers end up exiting the deal with very little profit.As Rigo says, their is always a new batch of investors out there willing to pay top dollar.    

The wholesales have a tendency to under state the repairs , making a house in the 75% to 80% range really a house in the 80 to 90 per cent range .  

I got an email from another vendor that some agents have been using these terms and other flavorful ones lately and we shouldn't.In fair housing, this issue comes up under steering and blockbusting.

Most of them - especially the small mom and pop operates - tend to overstate income (If you raise rents you'll make this" and understate expenses by conveniently forgetting to include some of them. 

Such methods are inherently inaccurate so they'll either overstate or understate the reality of the property.

One-foot overhang for eaves would be allowed.ADU Size (in sf)LOT SIZE (SF)ADU MAXIMUM SIZE (SF)3,000 - 5,4446005,445 - 9,0007009,001 - 10,00080010,001 - Up900LOT SIZE (SF)ADU MAXIMUM SIZE (SF)Up to 90001,0009,000 and greater1,200Number of Bedrooms and BathroomsTwo bedrooms allowed on lots with an area greater than 9,000 square feet, and only one bathroom.Up to two bedrooms and two bathrooms allowed for all units.Attached ADU Maximum Floor AreaMay not exceed 50% of the existing or proposed primary dwelling living area.May not exceed 50% of the existing or proposed primary dwelling living area or 800 square feet, whichever is greater.Design StandardsVisual compatibility with existing primary dwelling is required.No design standards, except new simplified standards for attached ADU units for historic buildings listed in the Historic Resources Inventory.Parking requirementsAn ADU requires 1 space unless the property qualifies for an exemption under State law—see the parking requirements.If a garage has been converted, the main dwelling parking space must be replaced, as uncovered or in front or side setback areas.

Seller's like to inflate the income on the pro forma and understate the expenses. 

I currently have an umbrella policy under State Farm.