Three approaches indicate $492,000 (sales comparison), $538,000 (cost) and $455,000 (income) for an owner-occupied suburban home. Reconciliation should:
Correct Answer
C) Weight sales comparison most heavily for this property type
Why this is correct: Weight sales comparison most heavily for this property type. For a typical owner-occupied suburban home, the market primarily relies on comparable sales. The sales comparison approach best reflects buyer behavior, so it receives the most weight in reconciliation. Why the other choices are wrong: Averaging the three indications substitutes arithmetic for professional judgment about reliability. Adopting the cost approach figure is not typical for this property type; cost is less relevant for existing homes. Report the range and decline to conclude a value is not reconciliation; the appraiser must reconcile to a single point estimate. Exam tip: Give the most weight to the approach that best mirrors the market's decision-making for that property type.
Why This Is the Correct Answer
Why this is correct: Weight sales comparison most heavily for this property type. For a typical owner-occupied suburban home, the market primarily relies on comparable sales. The sales comparison approach best reflects buyer behavior, so it receives the most weight in reconciliation. Why the other choices are wrong: Averaging the three indications substitutes arithmetic for professional judgment about reliability. Adopting the cost approach figure is not typical for this property type; cost is less relevant for existing homes. Report the range and decline to conclude a value is not reconciliation; the appraiser must reconcile to a single point estimate. Exam tip: Give the most weight to the approach that best mirrors the market's decision-making for that property type.
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?
The three approaches indicate $480,000, $495,000 and $610,000. What should the appraiser do first?
Three approaches indicate $1.02 million, $1.05 million and $1.04 million. How should this be reported?
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