Sales, cost and income indications are $412,000, $398,000 and $425,000. Before assigning weights, what should the appraiser evaluate?
Correct Answer
B) The applicability of each approach and the adequacy and reliability of its data.
The three numbers alone do not establish weights. Evaluate the approaches’ applicability and the evidence underlying them, then explain the conclusion. This is a national appraisal principle; no particular state tax assessor procedure is assumed.
Why This Is the Correct Answer
Option B is correct because reconciliation considers the appropriateness of each approach and the adequacy and reliability of the data behind it. USPAP likewise calls for reconciling the quality and quantity of data and the applicability and relevance of the approaches. Those factors, not the numbers themselves, justify the weights.
Why the Other Options Are Wrong
Option A: Which indication is closest to a desired loan amount.
Option A chooses the indication closest to a desired loan amount. Targeting a loan figure is bias, not analysis, and it ignores the reliability of the evidence.
Option C: Whether the arithmetic midpoint of the three indications is the highest possible result.
Option C asks whether the arithmetic midpoint of the three indications is the highest possible result. Seeking the highest result is not a valid weighting criterion, and a midpoint does not evaluate applicability or data quality.
Option D: Which of the calculations was completed last in the analysis.
Option D looks at which calculation was completed last. The order in which approaches were finished has no bearing on their reliability or relevance.
Fit and facts first
Check fit (is the approach applicable?) and facts (are its data adequate and reliable?) before assigning any weight.
How to use: Use this when asked what to evaluate before reconciling indications.
Exam Tip
Answers built around client goals, highest values or calculation order are distractors; pick the one about applicability and data quality.
Common Mistakes to Avoid
- -Assigning weights based on the size of the numbers
- -Letting the loan amount or client goal influence weighting
- -Skipping the evaluation of data adequacy
Concept Deep Dive
Analysis
This question tests what an appraiser evaluates before assigning weights. The three figures alone do not tell you which deserves most weight. You must assess how appropriate each approach is for the assignment and how adequate and reliable its data are, then explain the conclusion.
Background Knowledge
Before weighting, appraisers ask whether each approach fits the property type, interest appraised and intended use, and whether its data are sufficient and trustworthy. Approaches with strong, relevant data generally earn more weight. The reasoning must be explained in the report.
Real-World Application
An appraiser has sales, cost and income indications for a rented duplex. Before weighting, the appraiser notes that rent and expense data are well documented, sales are dated, and the building's depreciation is hard to measure. Those observations drive the weights and the written explanation.
More Reconciliation Questions
In a cost approach for an improved property, an appraiser estimates site value by sales comparison, allocation and extraction, then settles on one site-value figure before final reconciliation. How is this step best described?
An extraordinary assumption was reasonably supported, properly used and disclosed in an appraisal report. Later, the assumed information is found to be false. Which conclusion is best supported?
An otherwise applicable valuation approach cannot be developed reliably from the available data. The remaining scope can produce credible assignment results. What should the appraiser do?
May an appraiser use a hypothetical condition in any assignment?
An appraisal has a current effective date and permits an extraordinary assumption if its requirements are met. Which situation involves uncertain information rather than a fact known to be contrary to reality on that date?
Why must a report identify any real property interest that is being excluded from the value opinion?
Which review best helps explain divergent cost, sales-comparison and income indications?
Two value indications are $340,000 and $392,000. What is the difference as a percentage of the lower indication, rounded to one decimal place?
An unauthorized third party requests a lender-client’s report. No due-process or other permitted disclosure exception applies. How should the appraiser respond?
An appraiser proposes to assume there are no hidden defects. Which fact would characterize that assumption as extraordinary under the USPAP 2024 definition, rather than justify dismissing it as routine boilerplate?
People Also Study
Real Estate Market
13.6% of exam
Property Description
11.8% of exam
Land or Site Valuation
4.5% of exam
Sales Comparison Approach
16.4% of exam
Cost Approach
13.6% of exam
Previous Question
Adjusted sales of $402,000, $410,000 and $396,000 are weighted 50%, 30% and 20% within the sales comparison approach. The cost approach indicates $420,000. If the final reconciliation gives 80% weight to sales comparison and 20% to cost, what is the final value?
Next Question
Only one approach could be credibly developed for an assignment. What does reconciliation involve then?