The approaches used produce widely divergent indications. Which practice best supports reconciliation?
Correct Answer
B) Investigate the differences and compare relevance, data support and consistency.
Divergence calls for reviewing inputs, assumptions, calculations and method applicability. Then explain the relative support for the conclusion. A midpoint or equal average alone does not resolve differences, and agreement is not something to force by changing otherwise supported inputs.
Why This Is the Correct Answer
Option B is correct because widely divergent indications call for investigating the differences and comparing relevance, data support and consistency. USPAP reconciliation involves the quality and quantity of data in each approach and the applicability of each approach. Reviewing inputs, assumptions and calculations may reveal an error or show which approach is most reliable.
Why the Other Options Are Wrong
Option A: Average the indications immediately and ignore any differences in reliability.
Option A is wrong because averaging the indications immediately and ignoring differences in reliability skips the analysis that divergence demands. An average can hide an error or a weak approach.
Option C: Keep the highest indication without checking how the others were derived.
Option C is wrong because keeping the highest indication without checking how the others were derived selects by size and ignores the evidence. The highest figure may be the one with the weakest support.
Option D: Select the midpoint, since it lies between the two most extreme indications.
Option D is wrong because selecting the midpoint between the two most extreme indications is a formula that does not resolve why they differ. A midpoint is not supported simply because it lies between the extremes.
Spread means search
When indications spread far apart, search for the cause before you settle on a value.
How to use: Use this when a question describes approaches that produce very different results.
Exam Tip
Answers that average, take a midpoint or keep one figure without review are common distractors for divergence questions. Look for the option that investigates.
Common Mistakes to Avoid
- -Averaging divergent indications without investigating
- -Taking the midpoint of the highest and lowest indications
- -Changing well-supported inputs just to make the approaches agree
Concept Deep Dive
Analysis
This question asks how to reconcile when the approaches produce widely different indications. A large spread is a signal to investigate, not a reason to average or pick a number. The best practice examines why the results differ and compares relevance, data support and consistency before concluding.
Background Knowledge
Divergent indications often trace to a data problem, an inappropriate method, or a market condition one approach captures better than another. The appraiser should review inputs, assumptions and calculations. Supported inputs should not be changed merely to force the approaches into agreement.
Real-World Application
An appraiser finds the cost indication for an older home is far above the sales indication. On review, the appraiser realizes functional obsolescence from a dated floor plan was not captured, revises the depreciation analysis with market support, and explains the reconciliation.
More Reconciliation Questions
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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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