An appraiser extracts land value from six improved sales and gets results ranging from $70,000 to $145,000. What does this indicate?
Correct Answer
C) Investigate comparability and improvement estimates before reconciling
The range warrants investigation of comparability, sale terms and improvement estimates. It may reflect actual site differences, estimation uncertainty or both. Neither a simple mean nor blanket rejection of extraction is justified solely by the numerical spread.
Why This Is the Correct Answer
Option C is correct because a wide range of extracted land values calls for investigation of comparability, sale terms and the improvement estimates used. The spread may reflect real differences between sites, uncertainty in estimating improvement contributions, or both. Only after that investigation can the appraiser reconcile the indications responsibly.
Why the Other Options Are Wrong
Option A: The arithmetic mean of the six is the land value
Option A says the arithmetic mean of the six is the land value. Averaging widely spread results without understanding why they differ can hide real site differences or estimation errors, so a simple mean is not justified by the numbers alone.
Option B: Extraction is prohibited throughout the market
Option B says extraction is prohibited throughout the market. A numerical spread does not prohibit a method; it means the inputs and comparables need closer study before the results are relied on.
Option D: The range proves all sites have identical improvement contributions
Option D claims the range proves all sites have identical improvement contributions. A wide spread suggests the opposite: sites, improvements or estimates differ, and the range by itself proves nothing about identical contributions.
Wide spread, look deeper
When results scatter widely, treat the spread as a question to answer rather than a number to average.
How to use: Use this when an exam question describes a large range of indications and asks what it means.
Exam Tip
Answers that call for investigating data quality before reconciling are usually stronger than answers that average blindly or reject a method outright.
Common Mistakes to Avoid
- -Averaging all indications without checking why they differ
- -Discarding the extraction method because results vary
- -Assuming a range shows the comparables are identical
Concept Deep Dive
Analysis
This question tests how an appraiser should respond when extraction produces widely varying land indications. A spread from $70,000 to $145,000 is a signal to look deeper, not a value conclusion in itself. The sound response is to examine comparability, sale terms and the improvement estimates before reconciling.
Background Knowledge
Extraction subtracts the estimated depreciated value of improvements from sale prices, so any error in the improvement estimate flows directly into the land indication. Differences in location, size, sale conditions and financing also affect results. Reconciliation should weigh each indication according to the quality of its data.
Real-World Application
An appraiser extracts land values from six improved sales and finds one at $70,000 and another at $145,000. On review, she learns the high sale had a much larger lot and the low sale's improvement estimate understated the building's condition problems, so she revises and weights the indications accordingly.
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Previous Question
A duplex sold as a leased fee for $900,000, subject to a long-term lease at rent well below market. An appraiser wants to use the sale to estimate fee simple site value by extraction, and market data measure the effect of the lease. Which procedure is most appropriate?
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Where does the ratio used in the allocation method properly come from?