For a house, sales, cost and income indicate $485,000, $510,000 and $475,000. Verified competitive sales are strong; cost depreciation and rental evidence are weak. Which deserves most weight?
Correct Answer
D) Sales comparison, because the stipulated market evidence is strongest.
The verified comparable-sales evidence is strongest under the stated facts. A property category alone does not establish the weights, and neither the highest nor lowest result controls. Explain the reliability and limitations of each applicable indication.
Why This Is the Correct Answer
Option D is correct because sales comparison rests on the strongest stated evidence, verified competitive sales, while the cost depreciation and rental evidence are weak. Comparative sales are usually a more accurate index of market value than other available evidence, because the indicated value is direct evidence of the market's opinion. The appraiser should still explain the reliability and limits of each indication.
Why the Other Options Are Wrong
Option A: Cost, because the indication is highest.
Option A is wrong because giving most weight to cost because its $510,000 indication is highest ignores that cost depreciation is weakly supported. Being the highest figure is not a reason for reliance.
Option B: Income, because the indication is lowest.
Option B is wrong because giving most weight to income because its $475,000 indication is lowest ignores that the rental evidence is weak. Being the lowest figure is not a reason for reliance.
Option C: All three equally, because each indication has been calculated and reported.
Option C is wrong because calculating and reporting all three indications does not make them equally reliable. Equal weighting here would give weak cost and income evidence the same weight as strong verified sales.
Strength beats size
The strength of the evidence, not the size of the number, decides which indication leads.
How to use: Use this to eliminate options that justify weight by an indication being highest or lowest.
Exam Tip
When options cite the highest or lowest figure as a reason, compare them with an option that cites evidence quality. Rank alone is not a valid basis for weighting.
Common Mistakes to Avoid
- -Choosing the highest indication as the final value
- -Choosing the lowest indication because it seems safer
- -Weighting all approaches equally because each was calculated
Concept Deep Dive
Analysis
This question gives three indications for a house and states which evidence is strong and which is weak. The test is whether you weight by evidence quality rather than by the size of the number or by counting approaches. Verified competitive sales are strong, so sales comparison should lead.
Background Knowledge
Sales comparison is often the most persuasive approach for homes when good sales exist, because it reflects what buyers actually paid. That preeminence still depends on the facts; the property type alone does not set the weights. The appraiser explains why each indication received the reliance it did.
Real-World Application
An appraiser values a house in an active neighborhood with several verified recent sales, but the area has few rentals and the home's effective age makes depreciation hard to measure. The appraiser relies mainly on sales comparison and notes the weaknesses of the other approaches.
More Reconciliation Questions
Which stated cause of supported value loss is external?
Improvement cost new is $450,000. Separately supported improvement depreciation deductions of $45,000, $25,000, $15,000 are expressly nonoverlapping and not already excluded from cost new. Add supported site value of $125,000, already reflecting any site losses. What total indicated value results?
Which two depreciation categories may each be classified as curable or incurable by comparing the cost to remedy a deficiency with the value gained?
Improvement cost new is $800,000. Separately supported improvement depreciation deductions of $120,000, $80,000, $40,000 are expressly nonoverlapping and not already excluded from cost new. No site is included. What depreciated improvement amount results?
The principle of anticipation in real estate valuation states that:
Which highest-and-best-use criterion addresses whether a proposed use is allowed by zoning and applicable legal restrictions?
Three comparables produce adjusted indications of $312,000, $309,000 and $315,000, requiring gross adjustments of 9%, 14% and 22% respectively. Verification also establishes that the first sale is the closest competitive substitute and its adjustments are better supported than the other two. Which indication deserves the most weight on those facts?
When reconciling value indications from the three approaches to value, an appraiser should:
A property sold at a cash-equivalent price of $1,062,500. Its stabilized annual NOI is $85,000. What is the indicated overall rate?
In reconciliation, an appraiser should:
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