Six verified comparable land sales support $88,000 to $96,000. This assignment requires a point opinion. How should the appraiser select it?
Correct Answer
A) Weigh the relevance and reliability of the sales and support a point conclusion.
A required point opinion should be supported by the relative relevance and reliability of the sales. Verification alone does not make every sale equally comparable. Neither the lowest value nor a midpoint is automatically correct; a range may be permissible in other assignments.
Why This Is the Correct Answer
Option A is correct because a required point opinion should rest on the relative relevance and reliability of the sales. USPAP refers to reconciling the quality and quantity of the data analyzed. The appraiser weighs which sales are most comparable and supports the selected point with that reasoning.
Why the Other Options Are Wrong
Option B: Report the lowest amount simply to be conservative.
Option B, reporting the lowest amount of $88,000 simply to be conservative, replaces analysis with a preference for a low figure. Conservatism is not a basis for a supported, impartial opinion.
Option C: Select the arithmetic midpoint of the range, without reviewing the individual sales.
Option C, selecting the arithmetic midpoint of the range ($92,000) without reviewing the individual sales, is a mechanical choice. The midpoint is correct only if the sales support it.
Option D: Choose the highest amount, since each sale is verified.
Option D, choosing the highest amount of $96,000 because each sale is verified, confuses verification with comparability. Verified sales can still differ in how similar they are to the subject.
Best sales pick the point
The most relevant and reliable sales point to where in the range the value lies.
How to use: Use this when asked how to choose a point value from a range of indications.
Exam Tip
Reject answers that pick an endpoint or midpoint by rule; choose the one that weighs the sales and supports the point.
Common Mistakes to Avoid
- -Picking the low end to be conservative
- -Using the midpoint without analyzing the sales
- -Treating all verified sales as equally comparable
Concept Deep Dive
Analysis
This question tests how to select a point value from a supported range of land sales. The appraiser must weigh the relative relevance and reliability of each sale to support a point conclusion. Verification alone does not make every sale equally comparable, and neither an endpoint nor a midpoint is correct by default.
Background Knowledge
When an assignment requires a point value, the appraiser uses the most comparable and reliable data to pick a supported figure within the indicated range. Verification confirms the sale facts but does not make every sale equally similar to the subject. In other assignments, a range may be an acceptable form of opinion.
Real-World Application
Six land sales indicate $88,000 to $96,000. Two sales on the same street with similar size and topography indicate about $93,000. The appraiser concludes at $93,000 and explains that those sales are the most comparable.
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When approach indications differ, what should determine which receives greater weight?
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Before reconciling, an appraiser re-reads the engagement and finds that the assignment calls for a retrospective value as of a date 18 months ago. The cost approach was developed with current cost figures, while the comparable sales bracket the retrospective date. What is the best next step?