For a special-purpose property such as a rural church with no comparable sales, reconciliation will typically:
Correct Answer
A) Lean on the cost approach, explaining the sales approach's limits
Why this is correct: For special-purpose properties (like a church) with no comparable sales, the sales comparison approach is unreliable. The cost approach (cost to replace minus depreciation) often becomes the primary approach, but its limitations and the weakness of other approaches must be explained. Why the other choices are wrong: Leaning on sales comparison with thin data is not credible. Concluding it cannot be appraised is a last resort; an appraisal is often still possible. Imputed rent for a non-income-producing church is not applicable. Exam tip: No sales? The cost approach gets the most weight, but you must explain why.
Why This Is the Correct Answer
Why this is correct: For special-purpose properties (like a church) with no comparable sales, the sales comparison approach is unreliable. The cost approach (cost to replace minus depreciation) often becomes the primary approach, but its limitations and the weakness of other approaches must be explained. Why the other choices are wrong: Leaning on sales comparison with thin data is not credible. Concluding it cannot be appraised is a last resort; an appraisal is often still possible. Imputed rent for a non-income-producing church is not applicable. Exam tip: No sales? The cost approach gets the most weight, but you must explain why.
More Reconciliation Questions
Reconciliation of the approaches to value is best described as which activity?
Why should the reconciliation address the quantity of evidence as well as its quality?
How long must a report be retained compared with the workfile?
What distinguishes an appraisal review from an appraisal?
An appraiser reconciles to a value at the top of the indicated range because the client needs that figure. What has occurred?
What does it mean that a value opinion must be reasonable rather than merely arithmetically derived?
What should the reconciliation section explain to the reader?
How do the content obligations of the two report options differ with respect to the information analyzed?
The three approaches indicate $480,000, $495,000 and $610,000. What should the appraiser do first?
Three approaches indicate $1.02 million, $1.05 million and $1.04 million. How should this be reported?
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