Which practice best supports a credible final reconciliation?
Correct Answer
B) Weigh applicability and the quality and quantity of evidence.
Reconciliation evaluates the evidence and applicability of the methods rather than automatically selecting the highest, an unexamined average, or a client target. Explain the reasoning sufficiently for the intended users. The final opinion is a supported analytical conclusion.
Why This Is the Correct Answer
Option B is correct because USPAP calls for reconciling the quality and quantity of data and the applicability and relevance of the approaches used. Weighing those factors produces a supported analytical conclusion. The appraiser then explains the reasoning sufficiently for the intended users.
Why the Other Options Are Wrong
Option A: Select the highest indication to protect the borrower’s equity.
Option A, selecting the highest indication to protect the borrower's equity, advocates for a party's interest. Protecting anyone's equity is not a basis for a value opinion.
Option C: Average the indications, since all approaches were developed.
Option C, averaging the indications because all approaches were developed, assumes equal reliability without evaluating the data. Developing an approach does not make its indication as reliable as the others.
Option D: Choose the indication nearest the client’s requested value.
Option D, choosing the indication nearest the client's requested value, lets the client's target drive the result. That breaches impartiality.
Applicability plus evidence
Credible reconciliation weighs how applicable each method is and how strong its evidence is.
How to use: Use this to pick the best practice in a final reconciliation question.
Exam Tip
Answers that mention a party's interest, a requested value or an automatic average describe poor practice; pick the one about method applicability and evidence.
Common Mistakes to Avoid
- -Choosing the highest indication to help the borrower
- -Averaging because all approaches were developed
- -Moving toward the client's requested figure
Concept Deep Dive
Analysis
This question tests which practice produces a credible final reconciliation. USPAP directs the appraiser to reconcile the quality and quantity of data and the applicability and relevance of the approaches. Choosing the highest figure, averaging by default or following a client target all bypass that evaluation.
Background Knowledge
A credible final reconciliation evaluates each approach's applicability and the strength of its data. The appraiser explains how that evaluation leads to the final opinion. Conclusions driven by a party's interest or by an unexamined average lack that support.
Real-World Application
A borrower hopes for a high value to remove mortgage insurance. The appraiser weighs her strong sales data against a less reliable cost approach and concludes at the supported figure. She explains her weighting in the reconciliation section.
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?
In reconciliation, an appraiser should:
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