An appraiser is valuing a property where the cost approach indicates $520,000, the sales comparison approach indicates $485,000, and the income approach indicates $510,000. Given that this is an owner-occupied single-family residence in an active market with good comparable sales, which approach should receive the most weight?
Correct Answer
D) Sales comparison, as it best reflects market behavior
Under the stated active owner-occupant market and adequate comparable-sales evidence, sales comparison has the strongest support. The property label alone does not determine weights. Review the quality of the cost and income inputs as well, and explain why the verified sales evidence is more persuasive here.
Why This Is the Correct Answer
Option D is correct because, with an active owner-occupant market and good comparable sales, the sales comparison approach has the strongest support and best reflects market behavior. Single-family residences are generally bought for the amenities they provide rather than rental income, which makes the income approach less persuasive here. The appraiser should still review the cost and income inputs and explain why the verified sales evidence is more convincing.
Why the Other Options Are Wrong
Option A: Cost approach, because it gives the highest value
Option A, the cost approach because it gives the highest value ($520,000), is wrong because a higher indication is not a more reliable one. Weight follows applicability and data quality, not magnitude.
Option B: Income approach, because it sits in the middle here
Option B, the income approach because it sits in the middle ($510,000), is wrong because being near the middle of the range is not a basis for weight. Owner-occupied homes are generally not bought for rental income, so this approach is less applicable here.
Option C: All three approaches should be weighted equally here
Option C, weighting all three equally, is wrong because the approaches do not have equal support in this scenario. Equal weighting would ignore that the sales evidence is the strongest indicator for this property and market.
Homes follow what buyers pay
For an owner-occupied home with good sales data, what similar buyers actually paid is usually the strongest evidence.
How to use: Use this when a question asks which approach gets most weight for a home in an active market.
Exam Tip
Tie the weight to market behavior and data quality described in the facts. Reasons like highest, middle or equal are distractors.
Common Mistakes to Avoid
- -Weighting the approach with the highest indication
- -Choosing the middle indication as the most reliable
- -Weighting all approaches equally regardless of data quality
Concept Deep Dive
Analysis
This question tests how market conditions and evidence quality drive reconciliation weights. For an owner-occupied single-family home in an active market with good comparable sales, sales comparison best reflects how buyers actually behave. The position of a figure within the range is not a reason to weight it.
Background Knowledge
The approach that best measures the benefits a property provides, and that has adequate and reliable data, generally deserves the greatest reliance. For owner-occupied homes in active markets, comparable sales directly reflect how typical buyers price similar properties.
Real-World Application
An appraiser values a three-bedroom home in a busy subdivision with several recent sales of similar models. The cost and income approaches are developed as support, but the appraiser gives primary weight to sales comparison and explains that the closed sales most directly reflect local buyer behavior.
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