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 reconcile the reliable comparable evidence
The $27.00 indication differs materially from the other three, so investigate comparability, transaction terms, data accuracy and relevant adjustments before reconciliation. A cluster can be informative but is not automatically correct. Neither averaging every figure, choosing the highest indication nor discarding the lower three is justified solely by these four numbers.
Why This Is the Correct Answer
Option C is correct because the $27.00 indication differs materially from the others, so the appraiser should investigate comparability, terms, data accuracy and relevant adjustments before reconciling. Reconciliation then gives the greatest weight to the sales closest in comparability to the subject. Mechanical choices are not justified solely by these four numbers.
Why the Other Options Are Wrong
Option A: Average all four indications, giving $21.69 per square foot
Option A simply averages all four indications to $21.69 per square foot. Averaging lets an uninvestigated outlier pull the result up and does not weigh the sales by comparability.
Option B: Adopt $27.00 per square foot, since it is the most optimistic of the indications
Option B adopts $27.00 because it is the most optimistic indication. Choosing the highest number is advocacy, not analysis, and it relies on the very sale that most needs investigation.
Option D: Discard the three lower sales as unrepresentative of the market
Option D discards the three lower sales as unrepresentative. Nothing in the data shows the cluster is unreliable, and throwing out three consistent sales in favor of one outlier is not justified by these figures.
Investigate before you reconcile
When one comparable stands apart, find out why before deciding how much weight it gets. Weight follows comparability, not arithmetic.
How to use: Use this whenever a set of comparable indications contains a figure far from the rest.
Exam Tip
Answers that mechanically average, pick the highest, or discard data without analysis are usually wrong. Look for the choice that investigates and reconciles.
Common Mistakes to Avoid
- -Averaging all indications without analysis
- -Selecting the highest value to meet a target
- -Discarding data without verifying it
Concept Deep Dive
Analysis
This question tests how an appraiser handles an outlier among comparable indications. Three lots cluster near $20 per square foot while one shows $27.00, a material difference that calls for investigation before reconciliation. The appraiser examines comparability, transaction terms, data accuracy and adjustments, then gives most weight to the most comparable reliable sales.
Background Knowledge
Reconciliation in sales comparison is a reasoned weighing of comparable indications, not a mechanical calculation. Outliers can reflect data errors, unusual terms or real differences in comparability, so they need investigation. A cluster of similar indications can be informative but is not automatically correct.
Real-World Application
An appraiser finds that one lot sale is much higher per square foot than three others in the same subdivision. Verification shows it may involve different terms or features, such as a seller concession or a corner location, so the appraiser researches the details before weighting it. The final unit value relies most on the sales most similar to the subject.
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