The three approaches indicate $480,000, $495,000 and $610,000. What should the appraiser do first?
Correct Answer
A) Re-examine the outlier's data and reasoning
Why this is correct: When one value indication ($610,000) is an outlier compared to the others ($480,000, $495,000), the appraiser should first re-examine that outlier's data and reasoning. The divergence signals a potential error, misapplication, or unique factor that must be understood before forming a final opinion. Why the other choices are wrong: Averaging all three into a single conclusion would incorporate a potentially flawed indication. Discarding the outlier and averaging the other two is arbitrary without diagnosing the cause. Reporting the range without any point value avoids the reconciliation duty. Exam tip: An outlier is a clue; investigate it before deciding its weight.
Why This Is the Correct Answer
Why this is correct: When one value indication ($610,000) is an outlier compared to the others ($480,000, $495,000), the appraiser should first re-examine that outlier's data and reasoning. The divergence signals a potential error, misapplication, or unique factor that must be understood before forming a final opinion. Why the other choices are wrong: Averaging all three into a single conclusion would incorporate a potentially flawed indication. Discarding the outlier and averaging the other two is arbitrary without diagnosing the cause. Reporting the range without any point value avoids the reconciliation duty. Exam tip: An outlier is a clue; investigate it before deciding its weight.
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?
Three approaches indicate $1.02 million, $1.05 million and $1.04 million. How should this be reported?
A client sends comments disputing the appraiser's adjustment for condition. What is the appropriate response?
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