Two approaches to value indicate $545,000 and $525,000, and the appraiser assigns them weights of 60% and 40%, respectively. What is the weighted indication, rounded to the nearest dollar?
Correct Answer
C) $537,000
Use the specified matching order: $545,000 × 0.6 + $525,000 × 0.4 = $537,000.00. Rounded to the nearest dollar, this is $537,000. These are assigned arithmetic weights. Actual reconciliation requires a reasoned analysis of applicability and data reliability; property type alone does not prescribe this numerical weighting.
Why This Is the Correct Answer
Option C is correct because $545,000 × 0.60 = $327,000 and $525,000 × 0.40 = $210,000. Adding them gives $327,000 + $210,000 = $537,000. The result is already a whole dollar amount.
Why the Other Options Are Wrong
Option A: $535,000
Option A, $535,000, is the simple average: ($545,000 + $525,000) ÷ 2 = $535,000. It ignores the 60% and 40% weights; the weighted result is $537,000.
Option B: $545,000
Option B, $545,000, is the first indication alone, the one with the larger weight. A 60% weight does not make it the whole answer; the weighted sum is $537,000.
Option D: $327,000
Option D, $327,000, is only the first weighted component, $545,000 × 0.60 = $327,000, with the second component of $525,000 × 0.40 = $210,000 left out. Adding both gives $537,000.
Weighted result leans heavier side
A weighted result sits between the indications, closer to the one with more weight.
How to use: Use this to sanity-check a weighted answer: it must fall between the indications and lean toward the heavier weight.
Exam Tip
A correct weighted result must fall between the lowest and highest indications. Any answer outside that range, such as $327,000, signals a missing component.
Common Mistakes to Avoid
- -Using a simple average instead of the weights
- -Reporting only one weighted component
- -Reversing the weights between the indications
Concept Deep Dive
Analysis
This question tests a two-indication weighted average with weights in the stated order. Multiply each indication by its matching weight and add the products. The weights are stated in the facts.
Background Knowledge
A weighted average gives each indication influence in proportion to its weight, with weights totaling 100%. In practice, the weights should reflect each approach's applicability and data reliability and be explained in the report.
Real-World Application
An appraiser reconciling a duplex gives 60% weight to sales comparison and 40% to the income approach. A quick check confirms the weighted figure lies between the two indications and closer to the sales comparison result.
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