An appraiser writes that all three approaches were 'given equal consideration' and averages them. The methodological problem is:
Correct Answer
A) Averaging substitutes arithmetic for judgment about reliability
Giving equal weight solely because three approaches were developed substitutes counting for analysis. Equal weights can be justified when the evidence supports them, but the report must explain that support. Neither development effort nor the mere existence of an indication establishes reliability.
Why This Is the Correct Answer
Option A is correct because averaging substitutes arithmetic for analysis of each approach's reasonableness and reliability. Fannie Mae guidance states reconciliation is based on the appraiser's analysis and is not an averaging technique, except a weighted average with proper explanation. Treating approaches equally just because they were developed skips that analysis.
Why the Other Options Are Wrong
Option B: Three approaches may not be averaged together in an assignment
Option B says three approaches may not be averaged together in an assignment. No such flat prohibition exists; a weighted calculation is acceptable when it is supported and explained, so the real problem is the missing judgment.
Option C: The report should have used two of the three approaches
Option C says the report should have used two of the three approaches. The number of approaches is not the issue; the flaw is averaging without evaluating the reliability of whichever approaches were used.
Option D: Equal consideration is prohibited by appraisal standards
Option D says equal consideration is prohibited by appraisal standards. Considering each approach is appropriate, and equal weights can be justified by evidence; the problem is weighting by arithmetic rather than analysis.
Judgment, not just math
A calculator can average; only the appraiser can judge reliability, and reconciliation needs the judgment.
How to use: Use this when a question criticizes a report that averages indications.
Exam Tip
Watch for options that overstate the rule as a total ban on averaging or equal weights; the issue is unsupported, unexplained averaging.
Common Mistakes to Avoid
- -Treating equal weighting as automatically objective
- -Believing any averaging is prohibited
- -Omitting the explanation behind the weights
Concept Deep Dive
Analysis
This question tests why simple averaging is a weak reconciliation method. Saying all approaches got equal consideration and then averaging replaces judgment about each approach's reliability with arithmetic. Equal weights are acceptable only when the evidence supports them and the report explains that support.
Background Knowledge
Reconciliation requires evaluating each approach's reliability, the validity of the indications and the quality of the data, then selecting the approach or approaches given most weight. Weighted averages are acceptable as a tool when explained. A plain average without reasoning does not show the appraiser's judgment.
Real-World Application
A reviewer reads a report stating all three approaches were given equal consideration, followed by a straight average. The reviewer asks the appraiser to explain which approach is most reliable for the property and why. The revision assigns weights based on data quality and buyer behavior.
More Reconciliation Questions
In a cost approach for an improved property, an appraiser estimates site value by sales comparison, allocation and extraction, then settles on one site-value figure before final reconciliation. How is this step best described?
An extraordinary assumption was reasonably supported, properly used and disclosed in an appraisal report. Later, the assumed information is found to be false. Which conclusion is best supported?
An otherwise applicable valuation approach cannot be developed reliably from the available data. The remaining scope can produce credible assignment results. What should the appraiser do?
May an appraiser use a hypothetical condition in any assignment?
An appraisal has a current effective date and permits an extraordinary assumption if its requirements are met. Which situation involves uncertain information rather than a fact known to be contrary to reality on that date?
Why must a report identify any real property interest that is being excluded from the value opinion?
Which review best helps explain divergent cost, sales-comparison and income indications?
Two value indications are $340,000 and $392,000. What is the difference as a percentage of the lower indication, rounded to one decimal place?
An unauthorized third party requests a lender-client’s report. No due-process or other permitted disclosure exception applies. How should the appraiser respond?
An appraiser proposes to assume there are no hidden defects. Which fact would characterize that assumption as extraordinary under the USPAP 2024 definition, rather than justify dismissing it as routine boilerplate?
People Also Study
Real Estate Market
13.6% of exam
Property Description
11.8% of exam
Land or Site Valuation
4.5% of exam
Sales Comparison Approach
16.4% of exam
Cost Approach
13.6% of exam
Previous Question
Under Fannie Mae's Selling Guide, an appraiser finds that the uniqueness of the subject property calls for more explanation of the valuation than the report form's sections allow. What should the appraiser do?
Next Question
Which factor bears most directly on the weight an approach should receive?