An appraiser is valuing a residential lot. Five recent sales of comparable vacant lots adjust to a narrow range around $210,000, and extraction from one heavily improved sale in the same area indicates $165,000. What is the most appropriate reconciliation?
Correct Answer
A) Favor the vacant sales, using extraction as a check
The comparative sales approach is the most reliable method of valuing land when there are sufficient comparable sales, and five consistent sales meet that test. Extraction from a heavily improved property is the weaker evidence because its land figure is a remainder that depends on a large estimate. Equal averaging ignores that difference in quality, and favoring or moving toward the extraction gives the weaker indication control.
Why This Is the Correct Answer
Option A is correct because comparative sales give the most reliable land indication when sufficient comparable sales exist, as they do here. Extraction from a heavily improved property still has a use as a check, but its remainder is too dependent on the improvement estimate to control the conclusion.
Why the Other Options Are Wrong
Option B: Average the two indications with equal weight
Option B averages the two indications with equal weight. Both being recognized methods does not make the evidence equal in quality, and this average would give one weak indication the same weight as five consistent sales.
Option C: Favor the extraction, as it reflects total price paid
Option C favors the extraction because it reflects total price paid. The total price is observed, but the land portion is an estimate after a large deduction, so it is less direct than vacant sales.
Option D: Lower the vacant sales indication toward the extraction
Option D lowers the vacant sales indication toward the extraction. That changes strong market evidence to fit weaker evidence, with no market support for the change.
Weigh Evidence, Don't Average
Reconciliation asks which indication is best supported. Averaging skips that step.
How to use: Use this reminder when two land indications disagree and one rests on stronger data.
Exam Tip
When reconciling, compare the quantity and directness of the data behind each indication, then choose the option that reflects that comparison.
Common Mistakes to Avoid
- -Averaging indications without weighing the quality of their data
- -Adjusting strong sales evidence to agree with a weaker method
- -Treating an extracted land remainder as if it were directly observed
Concept Deep Dive
Analysis
Reconciliation weighs the quality of each indication; it is not a mathematical exercise. Five consistent vacant sales are direct evidence of land prices, while extraction from a heavily improved sale depends on a large estimated deduction. The better-supported indication should lead the conclusion.
Background Knowledge
The comparative sales approach is considered the most reliable way to value land when sufficient comparable sales are available. Other methods, including extraction, serve when such sales are lacking or as checks. Reconciliation gives the most weight to the best-supported evidence.
Real-World Application
An appraiser working in a growing subdivision has several recent vacant lot sales and one extraction from a large, recently built home. The appraiser concludes near the vacant-sale range and reports the extraction as a secondary test.
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A comparable improved property sold for $640,000. Market data indicate a land-to-total-property value ratio of 0.40 for similar properties. What land value is indicated by the allocation method?
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