Four comparable lots indicate $19.50, $20.00, $20.25 and $27.00 per square foot. The appraiser should:
Correct Answer
C) Investigate the outlier and rely on the cluster
Why this is correct: When three comparable sales cluster tightly ($19.50, $20.00, $20.25) and one is a clear outlier ($27.00), proper appraisal procedure is to first investigate the outlier sale. The appraiser must determine if there is a legitimate, transferable reason for the higher price (e.g., assemblage premium, superior feature) or if it is non-representative. The value conclusion should typically rely on the clustered data. Why the other choices are wrong: 'Average all four at $21.69 per square foot' would give undue weight to an unverified outlier, distorting the indication. 'Adopt $27.00 as the most optimistic indication' is not supported by the market evidence. 'Discard the three low sales as unrepresentative' is incorrect; the cluster likely represents the market. Exam tip: Clusters tell the story; outliers ask questions. Always investigate before including or excluding data.
Why This Is the Correct Answer
Why this is correct: When three comparable sales cluster tightly ($19.50, $20.00, $20.25) and one is a clear outlier ($27.00), proper appraisal procedure is to first investigate the outlier sale. The appraiser must determine if there is a legitimate, transferable reason for the higher price (e.g., assemblage premium, superior feature) or if it is non-representative. The value conclusion should typically rely on the clustered data. Why the other choices are wrong: 'Average all four at $21.69 per square foot' would give undue weight to an unverified outlier, distorting the indication. 'Adopt $27.00 as the most optimistic indication' is not supported by the market evidence. 'Discard the three low sales as unrepresentative' is incorrect; the cluster likely represents the market. Exam tip: Clusters tell the story; outliers ask questions. Always investigate before including or excluding data.
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