An appraiser builds a spreadsheet regression to support adjustments. How is it treated?
Correct Answer
B) As analysis the appraiser must be able to support
A self-built spreadsheet regression is an analytical method for which the appraiser remains responsible. Understand its inputs, specification and limitations, check formulas and diagnostic results, and retain adequate support. An unexpected coefficient calls for investigation of data, confounding and model fit; it is not by itself conclusive proof of one cause. The model does not waive necessary reconciliation or appropriate reporting.
Why This Is the Correct Answer
Option B is correct because a spreadsheet regression the appraiser builds is an analytical method for which the appraiser remains responsible. The appraiser must understand its inputs, specification and limitations, check formulas and diagnostics, and retain the data and analysis needed to support the resulting adjustments. USPAP requires the appraiser to maintain the data, information and analysis necessary to support his or her opinions under the Record Keeping Rule.
Why the Other Options Are Wrong
Option A: As exempt from disclosure, being the appraiser's own
Option A is wrong because being the appraiser's own work does not make the regression exempt from disclosure or support. Analysis that supports an opinion must be maintained in the workfile and must be supportable.
Option C: As an automated valuation model under the AVM rule
Option C is wrong because a regression the appraiser builds and controls to support adjustments is the appraiser's own analysis, not an automated valuation model under the AVM rule. Calling it an AVM confuses an analytical tool with a vendor model that produces a value estimate.
Option D: As a substitute for reconciling the approaches
Option D is wrong because a regression model does not substitute for reconciling the approaches. It supports adjustments within an approach, and the appraiser must still reconcile the indications and report appropriately.
Your tool, your responsibility
If you built it, you must be able to explain it, check it and support it. A homemade model carries the same support duty as any other analysis.
How to use: Use this when a question asks whether an appraiser's own spreadsheet or model escapes support or disclosure obligations.
Exam Tip
When a question involves an appraiser's analytical tool, look for the answer that keeps responsibility and support with the appraiser. An unexpected coefficient calls for investigation of data and model fit, not blind acceptance.
Common Mistakes to Avoid
- -Assuming the appraiser's own spreadsheet need not be retained or explained
- -Treating a regression result as a replacement for reconciliation
- -Accepting an unexpected coefficient as proof of one cause without investigating
Concept Deep Dive
Analysis
This question tests whether an appraiser's own analytical tools carry the same support obligations as any other part of the analysis. A self-built regression is part of how the appraiser develops adjustments, so the appraiser must understand it, check it and keep the data and analysis that support it. Ask who is responsible for the tool's output and what USPAP requires for analysis that supports an opinion.
Background Knowledge
Statistical tools such as regression can help quantify market reactions to property differences, but they are only as reliable as the data, model specification and diagnostics behind them. The appraiser is responsible for any method used and must keep the support for it in the workfile.
Real-World Application
An appraiser runs a regression on 40 neighborhood sales to support a garage adjustment and finds a coefficient with an unexpected sign. She checks the data for errors and confounding factors, reviews model fit, and keeps the dataset and output in the workfile so the adjustment can be explained in a review.
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