How should an appraiser handle numerical precision when applying a statistically estimated adjustment?
Correct Answer
B) Keep enough precision; justify final rounding by evidence and effect
Rounding may be appropriate when justified by the evidence and intended presentation, but premature or excessive rounding can distort an adjustment, especially when a unit rate is multiplied by a large area. Retain sufficient intermediate precision, assess material effect and present a supportable final result. There is no universal two-decimal rule or percentage-only restriction.
Why This Is the Correct Answer
Option B is correct because the appraiser should retain sufficient intermediate precision and justify any final rounding by the evidence and its effect on the result. Premature rounding can distort an adjustment when a unit rate is multiplied by a large area. A supportable final figure meets the requirement that credible results be supported by relevant evidence and logic.
Why the Other Options Are Wrong
Option A: Do not round any number that appears in the appraisal report
Option A says not to round any number in the report, but rounding may be appropriate when justified by the evidence and the intended presentation. Reporting excessive precision can imply more accuracy than the data support.
Option C: Round each intermediate rate to two decimals before multiplying
Option C rounds each intermediate rate to two decimals before multiplying, which is premature rounding that can distort the final adjustment. There is no universal two-decimal rule, and precision should be retained until the final result.
Option D: Round percentage adjustments but not dollar adjustments
Option D rounds percentage adjustments but not dollar adjustments, an arbitrary restriction with no basis. Whether to round depends on the evidence and the effect on the result, not on whether a figure is a percentage or a dollar amount.
Round Last, Not First
Carry full precision through the math and round only the final answer, to a degree the evidence supports.
How to use: Use this rule when a question asks when or how to round statistically derived adjustments.
Exam Tip
Be wary of answers that impose a fixed rounding rule for every case; look for the answer tied to evidence and material effect.
Common Mistakes to Avoid
- -Rounding intermediate rates before multiplying
- -Reporting more decimal places than the evidence supports
- -Applying an arbitrary rule that rounds only one type of figure
Concept Deep Dive
Analysis
This question tests sound handling of numerical precision when applying a statistical adjustment. The reasoning is that rounding is acceptable when supported by the evidence and presentation needs, but premature rounding of intermediate values can distort results, especially when a rate is multiplied by a large quantity. Credible results require support by relevant evidence and logic.
Background Knowledge
Statistical estimates carry uncertainty, so reporting them with excessive precision can mislead, but rounding too early compounds errors through later calculations. Good practice keeps full precision through intermediate steps and rounds the final result to a level consistent with the reliability of the evidence.
Real-World Application
An appraiser's regression gives a living-area rate of $87.46 per square foot. Rounding it to $90 before multiplying by a 600-square-foot difference would shift the adjustment by more than $1,500, so the appraiser keeps the precise rate and rounds only the final adjustment in a supportable way.
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