An appraiser assigns the following weights to the approach indications: sales comparison $3,100,000 at 30%; cost $4,900,000 at 50%; income $2,600,000 at 20%. What is the weighted indication, rounded to the nearest dollar?
Correct Answer
A) $3,900,000
Multiply each indication by its assigned weight and add: $3,100,000 × 0.3 + $4,900,000 × 0.5 + $2,600,000 × 0.2 = $3,900,000.00. The nearest-dollar result is $3,900,000. These weights are facts of this problem, not a universal rule about a property type. In an actual appraisal, selecting and explaining weights requires analysis of applicability and evidential reliability; a simple average or selecting one indication is not the stated computation.
Why This Is the Correct Answer
Option A is correct because $3,100,000 × 0.30 = $930,000, $4,900,000 × 0.50 = $2,450,000, and $2,600,000 × 0.20 = $520,000. Adding these gives $930,000 + $2,450,000 + $520,000 = $3,900,000. No rounding is needed because the result is already a whole dollar amount.
Why the Other Options Are Wrong
Option B: $3,533,333
Option B, $3,533,333, is the simple average of the three indications: ($3,100,000 + $4,900,000 + $2,600,000) ÷ 3 = $10,600,000 ÷ 3 = $3,533,333. It ignores the stated 30%, 50% and 20% weights; the weighted result is $3,900,000.
Option C: $4,900,000
Option C, $4,900,000, is simply the cost indication, the approach carrying the largest weight, taken by itself. Giving one approach 50% weight does not make it the whole answer; the correct sum of all weighted components is $3,900,000.
Option D: $3,380,000
Option D, $3,380,000, results from adding only the sales comparison and cost components ($930,000 + $2,450,000 = $3,380,000) and leaving out the income component of $2,600,000 × 0.20 = $520,000. Including all three gives $3,900,000.
Multiply each, then add all
Pair each indication with its own weight, multiply each pair, then add all the products. Check that the weights total 100% and that no component was dropped.
How to use: Use this when a question supplies indications and percentage weights and asks for a weighted result.
Exam Tip
Before choosing, confirm the number of products you added equals the number of indications. Distractors often reflect a simple average or a missing component.
Common Mistakes to Avoid
- -Taking a simple average and ignoring the stated weights
- -Dropping one of the weighted components when adding
- -Treating the most heavily weighted indication as the final answer
Concept Deep Dive
Analysis
This question tests whether you can apply stated weights to three approach indications and sum the products. Multiply each indication by its own weight, add the three results, and round. The weights here are stated facts, not a statement about how this property type should be reconciled.
Background Knowledge
A weighted indication multiplies each value indication by a percentage weight, with the weights summing to 100%, and adds the products. In real reconciliation the weights reflect the applicability and reliability of each approach, and the final opinion should not be produced by a mechanical formula alone.
Real-World Application
A reviewer checking an appraisal of a fourplex sees a reconciliation table listing three approach indications and percentages. The reviewer recomputes the weighted figure to confirm the arithmetic, then reads the narrative to see whether the weights are actually explained by the quality of the evidence.
More Reconciliation Questions
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