Before reconciling, an appraiser re-reads the engagement and finds that the assignment calls for a retrospective value as of a date 18 months ago. The cost approach was developed with current cost figures, while the comparable sales bracket the retrospective date. What is the best next step?
Correct Answer
A) Re-examine each approach so that its data and premises match the required effective date.
Reviewing the appraisal problem, including the date of the value estimate, comes before reconciliation so that basic conceptual errors are caught. A cost approach built on current costs answers a different question from the one the assignment asks, so it must be redeveloped as of the retrospective date. Weighting it more, disclosing the mismatch or averaging it with the sales indication would carry the error into the final value.
Why This Is the Correct Answer
Option A is correct because each indication must answer the same appraisal problem, including the required effective date. Re-examining the approaches so their data match the retrospective date corrects a basic conceptual error before reconciliation.
Why the Other Options Are Wrong
Option B: Give the cost approach more weight, because current costs are the most recent evidence.
Option B gives the cost approach more weight because current costs are the most recent evidence. For a retrospective value, recent evidence from after the effective date is the problem, not a strength.
Option C: Reconcile as developed and note the date difference as a limiting condition.
Option C reconciles as developed and notes the date difference as a limiting condition. A disclosure does not cure an indication developed for the wrong date; the analysis itself has to match the assignment.
Option D: Average the two indications to balance current and past market conditions.
Option D averages the two indications to balance current and past conditions, but the assignment asks for value at one date. Blending a current-date figure with a retrospective one produces a value for no particular date.
Same question, same date
Each indication must answer the same question as of the same date. If one answers a different question, rework it before weighing.
How to use: Use this when a stem reveals that one approach was built on a different date, property right or definition of value.
Exam Tip
When a stem shows an approach that does not match the assignment's basic premises, choose the answer that corrects the analysis rather than one that adjusts weights or adds a disclosure.
Common Mistakes to Avoid
- -Treating the most recent data as the most reliable in a retrospective assignment
- -Using a disclosure to excuse an analysis built on the wrong date
- -Averaging indications that answer different appraisal problems
Concept Deep Dive
Analysis
The question tests the review of the appraisal problem that precedes reconciliation. The effective date is a fundamental premise, and an indication developed as of the wrong date is not evidence of the value the client asked for. The appraiser must fix the premise before weighing anything.
Background Knowledge
Before reconciliation, the appraiser reconsiders the appraisal problem: the property, the property rights, the purpose and use, the definition of value, the date of value and highest and best use. Each value indicator must be consistent with these premises. An error in a premise is corrected in the analysis, not offset in the weighting.
Real-World Application
An appraiser preparing a retrospective value for an estate realizes the cost figures came from a current cost service. The appraiser obtains cost data as of the date of death and reworks the cost approach before reconciling it with the sales comparison approach.
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?
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