Two adjusted indications come in at $298,000 and $342,000, and the appraiser cannot determine why they differ. What is the appropriate course?
Correct Answer
C) Investigate the gap before concluding, since one of the two is likely wrong
Why this is correct: a forty-four thousand dollar spread between two adjusted sales means something in one of them is wrong — a verification failure, a missed adjustment, a property that is not comparable — and averaging an error with a sound figure produces a third wrong number. Why the other choices are wrong: conservatism is not a substitute for analysis and the lower figure may be the erroneous one; and handing an unresolved conflict to the client moves the appraiser’s work onto someone who cannot do it.
Why This Is the Correct Answer
Why this is correct: a forty-four thousand dollar spread between two adjusted sales means something in one of them is wrong — a verification failure, a missed adjustment, a property that is not comparable — and averaging an error with a sound figure produces a third wrong number. Why the other choices are wrong: conservatism is not a substitute for analysis and the lower figure may be the erroneous one; and handing an unresolved conflict to the client moves the appraiser’s work onto someone who cannot do it.
More Sales Comparison Questions
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A property has potential gross income of $180,000, vacancy and collection loss of $15,000, and operating expenses of $65,000. What is the Net Operating Income?
A comparable sale occurred 8 months ago for $425,000. Market conditions indicate property values have increased 0.5% per month since that time. What is the adjusted sale price?
A property generates $150,000 in potential gross income. Market data indicates a 7% vacancy rate and operating expenses of 35% of effective gross income. If the cap rate is 9.5%, what is the indicated value?
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In the cost approach, economic obsolescence is characterized as:
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