Sales comparison is more reliable than the developed cost and income indications after analysis. May the final opinion equal its indication?
Correct Answer
D) Yes, if reconciliation considers the other evidence and explains that reliance.
A final opinion may coincide with the best-supported indication. Considering other evidence does not require equal numerical weighting or deleting it when weaker. Explain why the sales evidence is more persuasive and how conflicting information was treated.
Why This Is the Correct Answer
Option D is correct because the final opinion may coincide with the best-supported indication if the reconciliation considers the other evidence and explains that reliance. In sales comparison, the indicated value is direct evidence of the market's opinion, which gives the approach a certain preeminence. USPAP calls for summarizing the reasoning, including reconciliation of the data and approaches.
Why the Other Options Are Wrong
Option A: No, an equal average of the three approaches is required for the final opinion.
Option A is wrong because no equal average of the three approaches is required for the final opinion. Reconciliation weighs reliability, and the final value may match the best-supported indication.
Option B: Yes, after the weaker cost and income analyses are deleted from the workfile.
Option B is wrong because the weaker cost and income analyses should not be deleted from the workfile. Considering other evidence means keeping and explaining it, not removing it because it carries less weight.
Option C: No, the final opinion must be midway between the highest and lowest.
Option C is wrong because the final opinion does not have to be midway between the highest and lowest indications. A midpoint rule replaces analysis with a formula.
Best evidence can decide
The final value can equal the best-supported indication, as long as the other evidence is considered and the reliance is explained.
How to use: Use this when a question asks whether the final value may match one approach.
Exam Tip
Look for a qualified yes: the final value can match one indication when the reasoning is explained. Unqualified rules about averages or midpoints are usually wrong.
Common Mistakes to Avoid
- -Believing the final value must be an average of the approaches
- -Deleting weaker analyses from the workfile
- -Using the midpoint of the highest and lowest indications
Concept Deep Dive
Analysis
This question asks whether a final opinion may equal the sales comparison indication when that approach is the most reliable. It may, provided the reconciliation considers the other evidence and explains the reliance. Distractors require averaging, a midpoint, or deleting the weaker analyses.
Background Knowledge
A final value that equals one approach's indication is common when that approach is clearly the most reliable. The appraiser still considers the other indications and explains why they received less weight. Workfile records of the analyses developed support the report and the reasoning.
Real-World Application
An appraiser sets the final value of a townhouse equal to the $362,000 sales comparison indication. The report explains that recent sales of identical units are strong evidence and notes why the cost and income indications were given less weight.
More Reconciliation Questions
In a cost approach for an improved property, an appraiser estimates site value by sales comparison, allocation and extraction, then settles on one site-value figure before final reconciliation. How is this step best described?
An extraordinary assumption was reasonably supported, properly used and disclosed in an appraisal report. Later, the assumed information is found to be false. Which conclusion is best supported?
An otherwise applicable valuation approach cannot be developed reliably from the available data. The remaining scope can produce credible assignment results. What should the appraiser do?
May an appraiser use a hypothetical condition in any assignment?
An appraisal has a current effective date and permits an extraordinary assumption if its requirements are met. Which situation involves uncertain information rather than a fact known to be contrary to reality on that date?
Why must a report identify any real property interest that is being excluded from the value opinion?
Which review best helps explain divergent cost, sales-comparison and income indications?
Two value indications are $340,000 and $392,000. What is the difference as a percentage of the lower indication, rounded to one decimal place?
An unauthorized third party requests a lender-client’s report. No due-process or other permitted disclosure exception applies. How should the appraiser respond?
An appraiser proposes to assume there are no hidden defects. Which fact would characterize that assumption as extraordinary under the USPAP 2024 definition, rather than justify dismissing it as routine boilerplate?
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Previous Question
Within the sales comparison approach, three comparables adjust to $431,000, $420,000 and $412,000, with gross adjustments of 5%, 10% and 20% of sale price respectively. The appraiser weights each sale in proportion to the inverse of its gross adjustment percentage (1/5, 1/10 and 1/20), then scales the weights to total 100%. What is the indicated value, rounded to the nearest dollar?
Next Question
Which statement correctly describes client and other intended-user identification in written real-property appraisal reports under USPAP 2024 SR 2-2(a) and (b)?