Under Fannie Mae's Selling Guide, a home has a sales comparison indication of $400,800 and a cost indication of $403,200. The appraiser's explained weighting (40% sales comparison, 60% cost) gives $402,240, and the appraiser usually rounds final values to the nearest $5,000. Which reporting choice is best?
Correct Answer
D) Report a finer rounding, such as $402,000, keeping it within the range
Rounding $402,240 to the nearest $5,000 gives $400,000, which is below the $400,800 to $403,200 range, and Fannie Mae requires the final reconciled value to lie within the range of the approaches used. A finer rounding such as $402,000 keeps the value within the range while avoiding false precision. Reporting $402,240 implies more precision than the data support, and $405,000 is above the range.
Why This Is the Correct Answer
Option D is correct because rounding $402,240 to a finer increment, such as the nearest $1,000, gives $402,000, which stays within the $400,800 to $403,200 range that Fannie Mae requires. It still rounds the figure, so it does not suggest dollar-level precision the data cannot support.
Why the Other Options Are Wrong
Option A: Report $400,000, because the usual rounding convention takes priority
Option A reports $400,000 because the usual convention takes priority. Rounding $402,240 to the nearest $5,000 gives $400,000, which is below the $400,800 low end of the range, so it breaks Fannie Mae's range requirement.
Option B: Report $402,240, because rounding misstates the precision of the data
Option B reports $402,240 unrounded, arguing that rounding misstates precision. The reverse is true: an unrounded figure implies dollar-level accuracy that market data rarely support, while a sensible rounding reflects realistic precision.
Option C: Report $405,000, because rounding up keeps the opinion conservative
Option C reports $405,000 by rounding up for conservatism. $405,000 is above the $403,200 high end of the range, and rounding up is not a conservative choice in any case.
Round, then check the fences
After rounding, check the result still sits between the lowest and highest indications. If it does not, round more finely.
How to use: Use this check whenever indications are close together and a coarse rounding increment is proposed.
Exam Tip
When indications are only a few thousand dollars apart, test whether the stated rounding increment would move the value outside their range.
Common Mistakes to Avoid
- -Applying a rounding habit without checking the range of indications
- -Reporting an unrounded figure that implies false precision
- -Treating rounding up as a conservative choice
Concept Deep Dive
Analysis
The question pits a habitual rounding convention against a Fannie Mae program rule. When indications are close together, coarse rounding can push the final figure outside the range of the approaches. The candidate must compute the effect of each rounding choice and select one that stays in range without implying false precision.
Background Knowledge
Final values are rounded to reflect the realistic precision of the analysis, and the size of the rounding increment is a judgment. Under Fannie Mae's Selling Guide, the reconciled value must also stay within the range of the approaches used, so the rounding increment should not push it outside that range.
Real-World Application
An appraiser who usually rounds to the nearest $5,000 values a new home where sales and cost indications are $2,400 apart. Seeing that $400,000 would fall below both indications, she reports $402,000 and notes the rounding in her reconciliation.
More Reconciliation Questions
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