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
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.
More appraisal-statistical-methods Questions
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An appraiser runs a regression of sale price on GLA, age, and a binary variable for 'renovated' (1 = yes, 0 = no). The estimated coefficient for 'renovated' is $18,400 with a standard error of $6,200 and a t-statistic of 2.97. Assuming a two-tailed test at Ξ± = 0.05 and 42 degrees of freedom, what conclusion is supported regarding the market's recognition of renovations?
To validate the functional form of a regression model used for adjustments, an appraiser plots residuals against predicted values and observes a clear inverted-U pattern. What does this pattern indicate, and what is the most defensible corrective action?
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