How should an appraiser handle an approach that produced an indication far outside the others and cannot be explained?
Correct Answer
A) Report it with an explanation of its limitations
Why this is correct: The governing concept is transparency and disclosure. An unexplained outlier is still evidence that was developed. Reporting it with an explanation of its limitations (e.g., data quality issues) allows the reader to understand why it received little weight in the final reconciliation, maintaining the report's integrity. Why the other choices are wrong: Deleting the approach and making no mention of it hides evidence and violates reporting standards. Adjusting its inputs until it agrees with the others is reverse engineering, not proper analysis. Reporting it with equal weight for completeness misrepresents the reliability of the approaches. Exam tip: Never hide or manipulate data to force agreement. Disclose and explain.
Why This Is the Correct Answer
Why this is correct: The governing concept is transparency and disclosure. An unexplained outlier is still evidence that was developed. Reporting it with an explanation of its limitations (e.g., data quality issues) allows the reader to understand why it received little weight in the final reconciliation, maintaining the report's integrity. Why the other choices are wrong: Deleting the approach and making no mention of it hides evidence and violates reporting standards. Adjusting its inputs until it agrees with the others is reverse engineering, not proper analysis. Reporting it with equal weight for completeness misrepresents the reliability of the approaches. Exam tip: Never hide or manipulate data to force agreement. Disclose and explain.
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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