Adjusted sale prices are $398,000, $404,000 and $431,000. The appraiser's indicated value is $402,000, below their $411,000 simple average. Which comment best explains the difference?
Correct Answer
C) The $431,000 sale needed the largest, least supported adjustments and got the least weight.
An indicated value differs from a simple average when the appraiser gives more weight to the more reliable sales. Here the $431,000 sale needed the largest and least supported adjustments, so it received the least weight and the indication sits near the other two; the Guide requires the comments to identify why sales received the most weight. There is no rule to round down for conservatism, the average is not a ceiling, and no fixed percentage test removes a sale.
Why This Is the Correct Answer
Option C is correct because giving the least weight to the $431,000 sale, which needed the largest and least supported adjustments, moves the indication toward the $398,000 and $404,000 sales. That explains a $402,000 conclusion below the $411,000 average and is the kind of reason the Guide expects the comments to give.
Why the Other Options Are Wrong
Option A: Final values are customarily rounded down to keep the conclusion conservative for lenders.
Option A says final values are customarily rounded down to stay conservative. Rounding does not explain a $9,000 gap, and the appraiser's job is an unbiased value, not one shaded for the lender.
Option B: The simple average acts as a ceiling that the indicated value may not go above.
Option B treats the $411,000 simple average as a ceiling. The limit that applies is the range of adjusted prices, $398,000 to $431,000, and the indicated value can sit anywhere within it that the evidence supports.
Option D: Any adjusted value more than 5% above the others is dropped from consideration.
Option D drops any value more than 5% above the others. No such fixed test applies; the sale's weight depends on its comparability and the support for its adjustments.
Average counts, weighting judges
A simple average counts every sale equally. Reconciliation judges which sales deserve more say.
How to use: Use this when asked why an indicated value is not the mean of the adjusted prices.
Exam Tip
An explanation tied to comparability or adjustment support beats one tied to rounding, conservatism or a fixed cutoff.
Common Mistakes to Avoid
- -Expecting the indicated value to equal the average of the adjusted prices
- -Shading the value down to be conservative
Concept Deep Dive
Analysis
The question asks why a reconciled indication departs from the simple average of $411,000 ($1,233,000 / 3). The right explanation ties the difference to the relative reliability of the sales, not to a rounding habit or a mechanical rule.
Background Knowledge
Reconciliation within the sales comparison approach weighs each adjusted sale by its similarity to the subject and the support for its adjustments. Because weights differ, the indicated value usually differs from the arithmetic mean of the adjusted prices.
Real-World Application
A borrower asks why the appraised value is lower than the average of the three adjusted sales. The appraiser points to the report comment explaining that the highest sale needed a large, weakly supported view adjustment and was given little weight.
More Reconciliation Questions
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