An appraiser cannot develop a credible sales comparison approach because comparable sales data are inadequate. In an Appraisal Report, what should the appraiser do?
Correct Answer
C) State why sales comparison was not developed and support the remaining analysis
Explain the reason for excluding sales comparison and determine whether the remaining development can still support credible results. An unavailable necessary approach cannot be replaced by an arbitrary cost result or a disclaimer; expand appropriate research or withdraw if credibility cannot be achieved.
Why This Is the Correct Answer
Option C is correct because an Appraisal Report must state the reasons for excluding the sales comparison, cost or income approach if any has not been developed. The appraiser should explain why sales comparison was not developed and support the remaining analysis. If credible results cannot be achieved, appropriate further research or withdrawal is the path, not an arbitrary substitute.
Why the Other Options Are Wrong
Option A: Substitute the cost approach for it without regard to the cost approach’s applicability
Option A substitutes the cost approach without regard to its applicability. An approach that does not apply to the property cannot produce credible results simply because another approach was unavailable.
Option B: Report an unsupported sales comparison result anyway
Option B reports an unsupported sales comparison result anyway. Reporting an approach the appraiser could not credibly develop would be misleading.
Option D: Expand the search indefinitely, even into noncompeting markets
Option D expands the search indefinitely, even into noncompeting markets. Sales from noncompeting markets are not reliable comparables, and an endless search does not cure the problem; research should stay within appropriate competing markets.
Skip it, say why
Any approach left out must be explained in the report.
How to use: Use this when a question asks how to handle an approach that was not developed.
Exam Tip
Prefer the answer that explains the exclusion and keeps the remaining analysis credible over answers that force a number or ignore relevance.
Common Mistakes to Avoid
- -Omitting an approach without explaining why
- -Using sales from noncompeting markets as comparables
- -Reporting an unsupported value from an approach that could not be credibly developed
Concept Deep Dive
Analysis
This question tests what an appraiser reports when an approach is not developed. USPAP requires the Appraisal Report to state the reasons for excluding any approach that was not developed. The appraiser must also judge whether the remaining analysis still supports credible results.
Background Knowledge
The scope of work determines which approaches are necessary for credible results. When an approach is not developed, the report must explain why, so intended users understand the basis of the conclusion.
Real-World Application
An appraiser values a unique special-purpose building with no meaningful sales in its market. She explains in the report why sales comparison was not developed and relies on a supported cost approach that is applicable to the property.
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