Sales comparison indicates $286,000 and is given 75% weight; the cost approach indicates $304,000 and is given 25%. What value is indicated?
Correct Answer
D) $290,500
Why this is correct: Calculation: ($286,000 x 0.75) + ($304,000 x 0.25) = $214,500 + $76,000 = $290,500. Why the other choices are wrong: $299,500 reverses the weights and lets the less reliable approach lead; $295,000 is the unweighted mean; $286,000 discards the cost indication rather than giving it the quarter weight it was assigned.
Why This Is the Correct Answer
Why this is correct: Calculation: ($286,000 x 0.75) + ($304,000 x 0.25) = $214,500 + $76,000 = $290,500. Why the other choices are wrong: $299,500 reverses the weights and lets the less reliable approach lead; $295,000 is the unweighted mean; $286,000 discards the cost indication rather than giving it the quarter weight it was assigned.
More Reconciliation Questions
Reconciliation of the approaches to value is best described as which activity?
Why should the reconciliation address the quantity of evidence as well as its quality?
How long must a report be retained compared with the workfile?
What distinguishes an appraisal review from an appraisal?
An appraiser reconciles to a value at the top of the indicated range because the client needs that figure. What has occurred?
What does it mean that a value opinion must be reasonable rather than merely arithmetically derived?
What should the reconciliation section explain to the reader?
How do the content obligations of the two report options differ with respect to the information analyzed?
The three approaches indicate $480,000, $495,000 and $610,000. What should the appraiser do first?
Three approaches indicate $1.02 million, $1.05 million and $1.04 million. How should this be reported?
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