An appraiser has extraction results from eight sales and wants a single land value. What is the appropriate step?
Correct Answer
B) Reconcile them, weighing the most comparable sales
Why this is correct: Reconciliation is the process of analyzing and weighting different value indications to arrive at a final conclusion. For eight extracted land values, the appraiser must weigh each result based on the comparability and reliability of its source sale, not simply average them. Why the other choices are wrong: "Adopt the arithmetic mean of all eight results" applies equal weight to all, ignoring differences in data quality. "Select the highest result to avoid understating land" is biased and unsupported. "Report the range and leave the choice to the client" abdicates the appraiser's professional judgment. Exam tip: Reconciliation requires reasoned weighting, not mechanical averaging.
Why This Is the Correct Answer
Why this is correct: Reconciliation is the process of analyzing and weighting different value indications to arrive at a final conclusion. For eight extracted land values, the appraiser must weigh each result based on the comparability and reliability of its source sale, not simply average them. Why the other choices are wrong: "Adopt the arithmetic mean of all eight results" applies equal weight to all, ignoring differences in data quality. "Select the highest result to avoid understating land" is biased and unsupported. "Report the range and leave the choice to the client" abdicates the appraiser's professional judgment. Exam tip: Reconciliation requires reasoned weighting, not mechanical averaging.
More land-or-site-valuation Questions
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What is the appraiser's obligation when a site's legal description does not match its apparent physical boundaries?
Why can the same physical parcel carry different values in two assignments?
A site differs from land in that a site is best described as which of the following?
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How is entrepreneurial profit treated in the subdivision development method?
A land comparable sold 18 months ago in a market rising about 4 percent a year. What adjustment direction applies?
In a land residual analysis for a proposed office development, the appraiser estimates total annual net operating income (NOI) will be $1,250,000. The improvement value, derived via the cost approach, is $15,000,000. Market evidence indicates a 7.0% overall capitalization rate is appropriate for similar improved properties. What is the indicated land value?
A developer plans a 36-lot residential subdivision on raw land. Each lot is expected to sell for $85,000. Total development costs (excluding land) are $1,420,000, including $220,000 for entrepreneurial incentive. The developer requires a 12% annual yield on invested capital over a 3-year development period. Using the subdivision development method, what is the maximum price the developer should pay for the land if all lots sell at the projected price and timing?
In applying the land residual technique to a proposed subdivision, an appraiser estimates that the time required to fully absorb all lots will be 6 years. The developer requires a 10% annual yield on invested capital. Which discounting approach is most appropriate for converting future net proceeds to present value?
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