A single-family house in a neighborhood of owner-occupants has been analyzed by all three approaches. How should the income approach indication be weighted?
Correct Answer
C) Little or none, because buyers in this market do not price by rent
Why this is correct: weight follows the behavior of the buyers in the market, and owner-occupants buy on comparable sale prices rather than on rental yield. Why the other choices are wrong: developing an approach is not a reason to weight it, only a precondition for considering it; being mathematical does not make an approach relevant to how this property trades; and a multiplier can be derived in many markets where nobody buys on one.
Why This Is the Correct Answer
Why this is correct: weight follows the behavior of the buyers in the market, and owner-occupants buy on comparable sale prices rather than on rental yield. Why the other choices are wrong: developing an approach is not a reason to weight it, only a precondition for considering it; being mathematical does not make an approach relevant to how this property trades; and a multiplier can be derived in many markets where nobody buys on one.
More Reconciliation Questions
Reconciliation of the approaches to value is best described as which activity?
Why should the reconciliation address the quantity of evidence as well as its quality?
How long must a report be retained compared with the workfile?
What distinguishes an appraisal review from an appraisal?
An appraiser reconciles to a value at the top of the indicated range because the client needs that figure. What has occurred?
What does it mean that a value opinion must be reasonable rather than merely arithmetically derived?
What should the reconciliation section explain to the reader?
How do the content obligations of the two report options differ with respect to the information analyzed?
The three approaches indicate $480,000, $495,000 and $610,000. What should the appraiser do first?
Three approaches indicate $1.02 million, $1.05 million and $1.04 million. How should this be reported?
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