An appraiser derives an overall rate of 7.5% from four sales ranging from 6.9% to 8.2%. The conclusion should:
Correct Answer
D) Explain why the selected rate fits the subject
Why this is correct: The appraiser's judgment in selecting a specific rate from a range must be justified. The governing concept is that the overall rate must reflect the subject property's specific income characteristics and risk relative to the comparable sales. The original explanation correctly states that the selection is a professional judgment, and a reviewer needs to see the reasoning linking the chosen 7.5% to the subject's unique attributes. Why the other choices are wrong: To "Average the four rates without comment" is wrong because a simple mathematical average ignores the specific applicability of each sale to the subject. To "Always use the midpoint of the observed range" is wrong because it applies a rigid rule that may not reflect the subject's position within the market spectrum. To "Adopt the lowest rate to be conservative" is wrong because it introduces bias and is not a supportable, objective valuation principle. Exam tip: In income questions, be ready to justify any selection from a range of market data. Your reasoning is as important as the final number.
Why This Is the Correct Answer
Why this is correct: The appraiser's judgment in selecting a specific rate from a range must be justified. The governing concept is that the overall rate must reflect the subject property's specific income characteristics and risk relative to the comparable sales. The original explanation correctly states that the selection is a professional judgment, and a reviewer needs to see the reasoning linking the chosen 7.5% to the subject's unique attributes. Why the other choices are wrong: To "Average the four rates without comment" is wrong because a simple mathematical average ignores the specific applicability of each sale to the subject. To "Always use the midpoint of the observed range" is wrong because it applies a rigid rule that may not reflect the subject's position within the market spectrum. To "Adopt the lowest rate to be conservative" is wrong because it introduces bias and is not a supportable, objective valuation principle. Exam tip: In income questions, be ready to justify any selection from a range of market data. Your reasoning is as important as the final number.
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