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) The improvement estimates or sales differ widely
Why this is correct: The extraction method subtracts an estimated improvement value from the total sale price to indicate site value. A wide range in results signals inconsistency, likely in the estimated improvement contributions or in the comparability of the sales themselves (e.g., differing site characteristics). Why the other choices are wrong: 'The average of the six is the correct land value' is wrong; averaging masks the underlying problem of inconsistency. 'Extraction cannot be used in this market at all' is an overreaction; the wide range is diagnostic, not a blanket prohibition. 'Land values in the market are genuinely that wide' is unlikely for comparable sites; such a spread usually points to an issue with the analysis inputs. Exam tip: A wide range in extracted values is a red flag to check your improvement estimates and sales comparability, not a signal to simply average.
Why This Is the Correct Answer
Why this is correct: The extraction method subtracts an estimated improvement value from the total sale price to indicate site value. A wide range in results signals inconsistency, likely in the estimated improvement contributions or in the comparability of the sales themselves (e.g., differing site characteristics). Why the other choices are wrong: 'The average of the six is the correct land value' is wrong; averaging masks the underlying problem of inconsistency. 'Extraction cannot be used in this market at all' is an overreaction; the wide range is diagnostic, not a blanket prohibition. 'Land values in the market are genuinely that wide' is unlikely for comparable sites; such a spread usually points to an issue with the analysis inputs. Exam tip: A wide range in extracted values is a red flag to check your improvement estimates and sales comparability, not a signal to simply average.
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