An appraiser's investigation establishes that a $412,000 sale is not comparable to the subject, so it is excluded. The remaining comparable sales indicate $301,000, $304,000, $306,000 and $309,000. What is the mean of the remaining indications?
Correct Answer
B) $305,000
(301000 + 304000 + 306000 + 309000) / 4 = 305000. Common errors: including the sale already found not comparable gives $326,400; dividing by 3 instead of 4 gives $406,667; reporting the lowest indication gives $301,000.
Why This Is the Correct Answer
Option B is correct because ($301,000 + $304,000 + $306,000 + $309,000) ÷ 4 = $1,220,000 ÷ 4 = $305,000. The excluded sale was removed on the basis of independent investigation, not its numerical distance. The equal mean uses all four remaining indications.
Why the Other Options Are Wrong
Option A: $301,000
Option A, $301,000, is simply the lowest indication, not the mean. Averaging the four indications gives $1,220,000 ÷ 4 = $305,000.
Option C: $326,400
Option C, $326,400, includes the sale already found not comparable: ($301,000 + $304,000 + $306,000 + $309,000 + $412,000) ÷ 5 = $1,632,000 ÷ 5 = $326,400. That sale was excluded, so the mean of the four is $305,000.
Option D: $406,667
Option D, $406,667, divides the four-sale total by 3 instead of 4: $1,220,000 ÷ 3 ≈ $406,667. Four indications require dividing by 4, giving $305,000.
Count what you add
Divide by the number of values you actually summed: four values, divide by four.
How to use: Use this to catch divisor errors in any averaging question.
Exam Tip
Confirm which sales are included before adding, then match the divisor to that count.
Common Mistakes to Avoid
- -Including a sale already shown to be non-comparable
- -Dividing by the wrong number of indications
- -Excluding a sale only because its figure is far from the others
Concept Deep Dive
Analysis
This question tests averaging only the comparable indications. The $412,000 sale has already been shown by independent investigation to be non-comparable, so it is left out. Sum the four remaining indications and divide by four.
Background Knowledge
A sale may be excluded when investigation shows it is not comparable, for example because of different market conditions or atypical terms. Numerical distance alone does not justify exclusion. Averaging is a simple arithmetic check, while final reconciliation gives weight to the most reliable evidence.
Real-World Application
An appraiser discovers that one comparable was a related-party transfer and removes it from the analysis. The four remaining adjusted indications are then reviewed together, with their average as one reference point.
More Sales Comparison 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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