Direct comparable land sales indicate $120,000 and extraction indicates $95,000. What is the best next step before reconciliation?
Correct Answer
C) Review both, including the improvement contribution used in extraction.
The divergence calls for checking the evidence behind both methods. In extraction, an error in the estimated contribution of improvements affects the residual land indication, but the difference alone does not establish which method is wrong. Compare their support before assigning weight.
Why This Is the Correct Answer
Option C is correct because the divergence between $120,000 and $95,000 calls for checking the evidence behind both methods. In extraction, site value is the total property value minus the contributory value of the improvements, so an error in the improvement estimate flows directly into the land indication. The difference alone does not show which method is wrong, so both must be reviewed before assigning weight.
Why the Other Options Are Wrong
Option A: Average the two land figures without any further investigation.
Option A, averaging the two land figures without investigation, is wrong because averaging hides the reason for the difference and may blend a reliable figure with an unreliable one.
Option B: Assume that the higher of the two indications must be correct.
Option B, assuming the higher indication must be correct, is wrong because a higher figure is not evidence of accuracy. The $120,000 indication still needs its support compared with the extraction result.
Option D: Treat the difference as proof that the direct land sales are unusable for this site.
Option D, treating the difference as proof that the direct land sales are unusable, is wrong because the gap does not identify which method is in error. The extraction figure could just as easily be the one affected by a misestimated improvement contribution.
Extraction equals price minus improvements
In extraction, land value is what is left after subtracting the improvements, so any error in the improvement estimate lands on the land value.
How to use: Use this when a question compares an extraction result with direct land sales.
Exam Tip
When two methods disagree, look for the answer that reviews both. Answers that average, pick the higher figure or declare one method unusable without analysis are distractors.
Common Mistakes to Avoid
- -Averaging conflicting land indications without investigation
- -Assuming the higher land indication is correct
- -Ignoring the improvement contribution estimate in extraction
Concept Deep Dive
Analysis
This question tests how to respond when two land valuation methods disagree. Direct land sales and extraction rest on different inputs, and extraction depends heavily on the estimated contribution of the improvements. The proper response is to review the support for both before deciding which deserves more weight.
Background Knowledge
Sales comparison of vacant land compares the subject site directly to similar site sales. Extraction estimates land value by subtracting the depreciated contribution of improvements from an improved sale price, so its reliability depends on how well that improvement contribution is estimated.
Real-World Application
An appraiser in a built-out suburb finds few vacant lot sales and uses extraction from improved sales as a check. The extraction result is much lower than the lot sales, so the appraiser revisits the depreciation applied to the older homes in those sales and verifies the lot sales' conditions before reconciling the site value.
More Reconciliation Questions
In a cost approach for an improved property, an appraiser estimates site value by sales comparison, allocation and extraction, then settles on one site-value figure before final reconciliation. How is this step best described?
An extraordinary assumption was reasonably supported, properly used and disclosed in an appraisal report. Later, the assumed information is found to be false. Which conclusion is best supported?
An otherwise applicable valuation approach cannot be developed reliably from the available data. The remaining scope can produce credible assignment results. What should the appraiser do?
May an appraiser use a hypothetical condition in any assignment?
An appraisal has a current effective date and permits an extraordinary assumption if its requirements are met. Which situation involves uncertain information rather than a fact known to be contrary to reality on that date?
Why must a report identify any real property interest that is being excluded from the value opinion?
Which review best helps explain divergent cost, sales-comparison and income indications?
Two value indications are $340,000 and $392,000. What is the difference as a percentage of the lower indication, rounded to one decimal place?
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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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Which review best helps explain divergent cost, sales-comparison and income indications?
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Three comparables adjust to similar prices. Sale 1 had 4% gross adjustments, was verified with a party to the sale and closed two months ago. Sale 2 had 9% gross adjustments, was verified and closed four months ago. Sale 3 had 27% gross adjustments, was not verified and closed ten months ago. Which weighting (Sale 1 / Sale 2 / Sale 3) is best supported?