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
Investigate why $610,000 differs materially from $480,000 and $495,000. Check rights, inputs, effective dates, calculations and method applicability before assigning weight. Neither automatic exclusion nor averaging explains the discrepancy; then develop the supported conclusion in the form appropriate to the assignment.
Why This Is the Correct Answer
Option A is correct because USPAP requires reconciling the quality and quantity of data within the approaches and the applicability and relevance of the approaches used. Re-examining the outlier's data and reasoning checks for differences in rights, inputs, dates, calculations or method fit. Only after that review can the appraiser decide how to weight it.
Why the Other Options Are Wrong
Option B: Average all three into a single conclusion
Option B, averaging all three into a single conclusion, blends a possibly flawed $610,000 figure into the result without finding out why it differs. Averaging does not explain the discrepancy.
Option C: Discard the outlier and average the other two
Option C, discarding the outlier and averaging the other two, removes the $610,000 indication without knowing whether it is wrong. The outlier might reveal something the other approaches missed.
Option D: Report the range without any point value
Option D, reporting the range without any point value, skips the investigation and may not fit an assignment that needs a point opinion. A range still needs the discrepancy to be analyzed.
Ask why before you weigh
When one indication stands apart, ask why it differs before deciding how much it counts.
How to use: Use this when a question asks what to do first with an outlying indication.
Exam Tip
The word first signals an investigative step; choose the answer that checks the outlier before any averaging or discarding.
Common Mistakes to Avoid
- -Averaging a suspicious indication into the result
- -Throwing out the outlier without checking it
- -Assuming the two agreeing indications must be right
Concept Deep Dive
Analysis
This question tests the first response to an outlying indication. The $610,000 figure is well above $480,000 and $495,000, so the appraiser should find out why before deciding how much weight to give it. Averaging, discarding or reporting only a range all skip that investigation.
Background Knowledge
Reconciliation evaluates the data quality and applicability of each approach. A large difference between indications often points to an error, different property rights or a method that does not fit the property. Investigating it comes before assigning weight.
Real-World Application
An appraiser's income approach comes out far above her sales and cost indications. On review, she finds she used a lease rent above market rent. After correcting to market rent, the income indication falls in line, and she reconciles with the corrected figure.
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?
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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?
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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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