In reconciliation, an appraiser should:
Correct Answer
A) Consider the reliability and applicability of each approach to the specific property type
Reconciliation weighs the applicable indications according to the evidence supporting them. The purpose is a credible conclusion for the assignment, rather than automatic averaging or selecting a desired number. Numerical equality of weights is permissible only when the reasoning supports it.
Why This Is the Correct Answer
Option A is correct because reconciliation weighs the applicable indications according to the evidence supporting them. The appropriateness of an approach is often related to the type of property and the available data. Considering reliability and applicability leads to a credible conclusion for the assignment.
Why the Other Options Are Wrong
Option B: Give the most weight to the approach that produces the highest value indication for the client
Option B, giving the most weight to the approach with the highest value indication for the client, selects a desired number. That is advocacy, not analysis of support.
Option C: Use the sales comparison approach and disregard the others for residential properties
Option C, using sales comparison and disregarding the others for residential properties, applies a blanket rule. Other approaches may be applicable and should be evaluated on their reliability.
Option D: Average the three approaches to value equally in each assignment
Option D, averaging the three approaches equally in each assignment, is mechanical. Equal weights are acceptable only when the reasoning supports them, not as a standing practice.
Fit the property, fit the data
Two checks decide weight: does the approach fit this property type, and is its data reliable?
How to use: Use these two checks to test each approach before assigning weight.
Exam Tip
Answers that mention reliability and applicability to the property are usually correct in reconciliation questions; answers with fixed weights are usually not.
Common Mistakes to Avoid
- -Applying equal weights as a default
- -Disregarding an applicable approach for residential property by habit
- -Choosing the indication that suits the client
Concept Deep Dive
Analysis
This question tests the basic reconciliation principle that weight follows evidence. The appraiser considers how reliable and applicable each approach is for the specific property type and data available. Options that average by rule or select a desired number fail that test.
Background Knowledge
The type of property and the data available determine which approaches are most meaningful. The greatest weight goes to the approach that best measures the type of benefits the property yields.
Real-World Application
For a newer rental duplex with good cost data, solid rental comparables and few sales, the appraiser relies mainly on income and cost, giving sales comparison less weight and explaining that sales data are thin.
More Reconciliation 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?
The bundle of rights concept in real estate includes all of the following EXCEPT:
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