Under Fannie Mae's Selling Guide, sales comparison indicates $512,000 and cost indicates $530,000 for a newly built house. Which reported final reconciliation complies with the Guide?
Correct Answer
D) $515,600, from 80/20 weights explained by the stronger support for the sales data
Weighting 80% sales comparison and 20% cost gives (0.80 x $512,000) + (0.20 x $530,000) = $409,600 + $106,000 = $515,600, within the $512,000 to $530,000 range. The Guide prohibits averaging except a weighted average with proper explanation, so the same figure without explanation does not comply, and neither does the unexplained $521,000 simple average. A value of $532,000 lies outside the range of the approach indications.
Why This Is the Correct Answer
Option D is correct because 0.80 x $512,000 + 0.20 x $530,000 = $515,600, which lies within the range of the indications, and the weights are explained by the stronger support for the sales data. That meets the Guide's exception for a weighted average with proper explanation.
Why the Other Options Are Wrong
Option A: $515,600, from 80/20 weights reported without comment on why they were chosen
Option A has the right arithmetic, $409,600 + $106,000 = $515,600, but reports the 80/20 weights without saying why. The Guide accepts a weighted average only when it includes proper explanation.
Option B: $521,000, the simple average of the two indications, reported without comment
Option B reports $521,000, the simple average ($512,000 + $530,000) / 2, without comment. The Guide says reconciliation must not be an averaging technique, and nothing here explains why equal weight is justified.
Option C: $532,000, set above the cost indication because the house is newly built
Option C reports $532,000, above the $530,000 cost indication. The final reconciled value must be within the range of the approach indications, $512,000 to $530,000.
Numbers need reasons
A weighted figure passes only with an explanation and a place inside the range. Same number, no reason, no pass.
How to use: Use this when two answer choices share a value and differ only in how it is supported.
Exam Tip
When options repeat the same figure, the deciding factor is usually the explanation, not the arithmetic.
Common Mistakes to Avoid
- -Reporting weights without stating why they were chosen
- -Placing the final value outside the range of the approaches
- -Using a simple average as the reconciliation
Concept Deep Dive
Analysis
The candidate must verify the weighted figure and then apply two Fannie Mae rules: averaging is allowed only as an explained weighted average, and the final value must lie within the range of the approaches. Two options share the same number, so the explanation decides the answer.
Background Knowledge
A weighted average can express an appraiser's judgment about which approach is more reliable, but the weights mean nothing to a reader without reasons. Fannie Mae therefore allows weighted averaging only with explanation and requires the final value to sit within the range of the approaches.
Real-World Application
For a new house in a subdivision with plenty of resales, an appraiser gives sales comparison 80% weight and cost 20%. The report explains that the resales are recent and verified while cost supports the conclusion, and the final value sits between the two indications.
More Reconciliation Questions
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