Adjusted comparable indications are $402,000, $408,000 and $413,000. A reviewer says choose the lowest solely because the subject has inferior appeal, although that appeal difference is already reflected in all adjustments. What is the appropriate response?
Correct Answer
B) Avoid double-counting appeal and reconcile the indications
First check whether the subject’s differing appeal has already been reflected in the comparable adjustments. If so, applying another reduction solely for the same difference would double count. Reconcile the support and reliability of the indications rather than default to the lowest, highest, most recent or unweighted mean. If a material difference remains unaccounted for, analyze it with supported methods.
Why This Is the Correct Answer
Option B is correct because the subject's inferior appeal is already reflected in the adjustments to all three comparables. Picking the lowest indication solely for that reason would reduce value twice for the same difference. Instead, the appraiser reconciles the indications by weighing the support and reliability of each.
Why the Other Options Are Wrong
Option A: Select the lowest indication, $402,000, as the reviewer suggests
Option A selects the lowest indication, $402,000, as the reviewer suggests. Since the appeal difference is already built into all the adjustments, choosing the low end for that same reason double counts it.
Option C: Use the unweighted mean of the three indications without review
Option C uses the unweighted mean of the three indications without review. Reconciliation requires judging each indication's reliability, and a mechanical average skips that analysis.
Option D: Use only the most recent sale without regard to its reliability
Option D uses only the most recent sale without regard to its reliability. Recency is one factor, but ignoring the reliability of the comparable is not sound reconciliation.
Count it once
If a difference is already in the grid, it is already in every adjusted price. Do not take it out again in reconciliation.
How to use: Use this check whenever someone wants to shift the final value for a factor already adjusted.
Exam Tip
Reconciliation answers that simply pick the lowest, highest, average or newest indication without weighing reliability are usually wrong.
Common Mistakes to Avoid
- -Adjusting for the same difference both in the grid and in reconciliation
- -Averaging indications mechanically without weighing reliability
- -Relying on a single sale only because it is the most recent
Concept Deep Dive
Analysis
This question tests reconciliation and the risk of double counting. If the subject's inferior appeal is already reflected in every comparable's adjustments, choosing the lowest indication for that same reason would count the difference twice. The appraiser should reconcile the indications based on their support and reliability.
Background Knowledge
Reconciliation in the sales comparison approach weighs the adjusted indications according to the quality of the data, the number and size of adjustments, and similarity to the subject. Double counting occurs when the same difference is accounted for in more than one place. A well-supported grid already handles measured differences, so the reconciliation should not repeat them.
Real-World Application
A reviewer asks an appraiser to choose the low indication because the subject backs onto a busy road. The appraiser shows the grid already includes a supported location adjustment for that road noise on every comparable. The final value is reconciled near the indication with the fewest and smallest adjustments, and the response explains why.
More Sales Comparison Questions
Supported adjustments are: non-market financing $10,000, GLA $36/sf, garage $3,500 per car, pool/spa $12,500. A comparable identical to the 2,800 sf subject sold for $267,000 with non-market financing. What is its adjusted price?
Using GLA $36/sf and non-market financing $10,000: a 3,100 sf comparable sold for $277,000 with non-market financing; the subject has 2,800 sf. Bath count differences are not adjusted. What is the adjusted price?
Using garage $3,500 per car and pool/spa $12,500: a comparable with a 2-car garage and a pool/spa sold for $268,000. The subject has a 3-car garage and no pool. What is the adjusted price?
Using GLA $36/sf, garage $3,500 per car and pool/spa $12,500: a 2,600 sf comparable with a 2-car garage and a pool/spa sold for $264,000. The subject is 2,800 sf with a 3-car garage and no pool. What is the adjusted price?
In a neighborhood with declining values and marketing times over six months, what must Fannie Mae lenders confirm about the sales comparison analysis?
A house is a 4,000 square foot home in an area of 2,000 square foot homes. How must the appraiser treat this over-improvement in the sales comparison grid?
According to the Interagency Appraisal and Evaluation Guidelines, which items should an appraisal’s market conditions discussion include?
A comparable listed at $420,000 and sold for $399,000. What sale-to-list price ratio (sale price ÷ list price) does this indicate?
An appraiser wants to describe the neighborhood boundaries in a Fannie Mae report. Which approach is acceptable?
Which of these is listed by Fannie Mae as a sales or financing concession?
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