On a Fannie Mae appraisal report form, the approach indications are $455,000 and $472,000, and the appraiser writes in the Reconciliation section that the value is 'between $455,000 and $472,000.' What is the problem?
Correct Answer
A) A final value opinion within that range should be reported instead.
Under Fannie Mae's Selling Guide, after considering each approach the appraiser provides a final value opinion, and that final reconciled value must lie within the range of the approaches used. Restating the range is not a reconciliation. Widening the range, averaging the two figures, or picking the lower one for conservatism all skip the required analysis.
Why This Is the Correct Answer
Option A is correct because Fannie Mae's Reconciliation section calls for the appraiser to provide a final value opinion after considering each approach, and that final reconciled value must lie within the range of the approaches used. The range of $455,000 to $472,000 is the boundary for the opinion, not the opinion itself.
Why the Other Options Are Wrong
Option B: The range should be widened to reflect uncertainty in the cost approach.
Option B widens the range to reflect cost approach uncertainty. A wider range moves further from the final value opinion the form requires, and uncertainty in one approach is handled by weighting it less.
Option C: The range should be replaced with the average of the two indications.
Option C replaces the range with the average of the two indications. Fannie Mae does not accept a simple averaging technique; the final figure must come from analysis, with any weighted average properly explained.
Option D: The lower indication should be reported because it is more conservative.
Option D reports the lower indication because it is more conservative. Market value is not chosen for conservatism; the indication that receives the most weight should be chosen for its reliability and applicability.
The range frames the answer
The range of indications frames where the answer can go. The reconciled value is the single point the appraiser chooses inside that frame.
How to use: Use this when a question shows a Fannie Mae report stating a range in place of a final value.
Exam Tip
For Fannie Mae form questions, expect one final reconciled value that sits within the range of the approaches used.
Common Mistakes to Avoid
- -Reporting the range of indications as the final value on a form report
- -Averaging the indications to produce a point value without analysis
- -Choosing the lowest indication for conservatism
Concept Deep Dive
Analysis
This question tests the difference between a point value and a range in a Fannie Mae report. The Selling Guide expects a final value opinion that lies within the range of the indications, so simply restating the range leaves the reconciliation undone. The distractors each change the figure without doing the weighing that reconciliation requires.
Background Knowledge
A value opinion can be expressed in different forms depending on the assignment, but Fannie Mae's report forms call for a final value opinion. The range of approach indications serves as a check on that opinion rather than as the reported value.
Real-World Application
A trainee's draft reconciliation reads 'between $455,000 and $472,000.' The supervising appraiser has the trainee weigh the stronger sales comparison evidence, explain the weighting, and report a single final value inside that range.
More Reconciliation Questions
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