The land value indication from sales comparison is $120,000 and from extraction $95,000. What should the appraiser do?
Correct Answer
C) Examine the improvement estimate behind extraction
Why this is correct: The land value from the extraction method is calculated by subtracting the depreciated value of improvements from the total property value. A significant discrepancy ($25,000 here) suggests a potential error in the estimated improvement contribution or its depreciation. The appraiser must first investigate this input rather than arbitrarily choosing or averaging the figures. Why the other choices are wrong: The choice to adopt $120,000 because direct sales always prevail is incorrect; direct sales are preferred but must be analyzed for comparability. The choice to average them and report $107,500 is wrong; mechanical averaging without diagnosing the cause is not proper reconciliation. The choice to report both figures without a conclusion is false; the appraiser must reconcile to a single opinion of value. Exam tip: A large variance between approaches is a red flag to check your inputs, especially depreciation in extraction.
Why This Is the Correct Answer
Why this is correct: The land value from the extraction method is calculated by subtracting the depreciated value of improvements from the total property value. A significant discrepancy ($25,000 here) suggests a potential error in the estimated improvement contribution or its depreciation. The appraiser must first investigate this input rather than arbitrarily choosing or averaging the figures. Why the other choices are wrong: The choice to adopt $120,000 because direct sales always prevail is incorrect; direct sales are preferred but must be analyzed for comparability. The choice to average them and report $107,500 is wrong; mechanical averaging without diagnosing the cause is not proper reconciliation. The choice to report both figures without a conclusion is false; the appraiser must reconcile to a single opinion of value. Exam tip: A large variance between approaches is a red flag to check your inputs, especially depreciation in extraction.
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