An analysis excludes 15 of 60 sales without explanation. What is the concern?
Correct Answer
C) A quarter of the evidence was removed unaccountably
Why this is correct: Excluding a significant portion (25%) of the data without explanation undermines the credibility and transparency of the analysis. The reader cannot assess whether exclusions were reasonable (e.g., removing non-arm's length sales) or biased. Why the other choices are wrong: 'Sixty sales are too few for any statistical work' is not necessarily true; sample sufficiency depends on the market and analysis. 'Exclusions must be approved by the client first' is incorrect; the appraiser has professional responsibility for data selection. 'Excluded sales must be replaced with new ones' is wrong; the goal is a reliable sample, not a specific number of sales. Exam tip: Always disclose the criteria for including or excluding sales data in your analysis.
Why This Is the Correct Answer
Removing a quarter of the sample without stating the criteria leaves a reader unable to tell whether the exclusions were principled or selected to support a conclusion.
Why the Other Options Are Wrong
Option A: Sixty sales are too few for any statistical work
Sixty sales is an ample sample for most residential market analysis. Sample size is not the concern here.
Option B: Exclusions must be approved by the client first
Data selection is the appraiser's judgment. Client approval of exclusions would compromise independence rather than cure the problem.
Option D: Excluded sales must be replaced with new ones
There is no requirement to replace excluded sales. The requirement is to explain why they were removed.
Say What You Threw Out
Say What You Threw Out and why. Silent exclusions look like the sales that disagreed with you.
How to use: State the criteria before running the analysis, then report how many fell under each.
Exam Tip
The problem is transparency, not the exclusions themselves. Legitimate criteria properly reported raise no objection.
Common Mistakes to Avoid
- -Excluding data without stating criteria
- -Treating exclusions as a client decision
- -Assuming any exclusion is improper
Concept Deep Dive
Analysis
Excluding data is a legitimate and necessary part of analysis — sales between related parties, distressed transactions, transfers with unusual financing and outright bad data all belong outside a market study. What is not legitimate is excluding them silently. Removing a quarter of the sample without explanation means a reader cannot tell whether the exclusions were principled or whether they were the sales that disagreed with the conclusion, and that uncertainty undermines the entire analysis. USPAP's reporting requirement is that intended users be able to understand the report, which for a data study means knowing what was in the sample, what was removed and why. Stating the criteria in advance — arm's-length only, no distressed sales, verified data — and then reporting how many were removed under each criterion converts an unaccountable gap into a documented method. The distractors miss the point in three ways: sixty sales is ample, exclusions are the appraiser's judgment rather than the client's, and there is no requirement to replace what is removed.
Background Knowledge
USPAP requires reports to contain sufficient information for intended users to understand them. Data exclusions in a market study should follow stated criteria and be reported with the reasons and counts.
Real-World Application
An appraiser reports removing 15 sales — nine non-arm's-length, four distressed, two unverifiable — and states each criterion in the market analysis.
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