An otherwise applicable valuation approach cannot be developed reliably from the available data. The remaining scope can produce credible assignment results. What should the appraiser do?
Correct Answer
B) Explain the data limitation and justified exclusion of that approach.
Data availability and conceptual applicability are different questions. If excluding an approach is consistent with the assignment and the remaining scope supports credible results, explain the exclusion and its basis. Missing evidence does not authorize unsupported inputs.
Why This Is the Correct Answer
Option B is correct because when the remaining scope can produce credible results, excluding an unsupportable approach is acceptable if the report explains the data limitation and the basis for the exclusion. USPAP reporting requirements call for stating the reasons for excluding the sales comparison, cost or income approach when one has not been developed. This keeps the analysis credible and transparent to intended users.
Why the Other Options Are Wrong
Option A: Use unsupported inputs so that each approach is developed.
Option A, using unsupported inputs so each approach is developed, is wrong because developing an approach with made-up or unsupported data produces an unreliable indication. Missing evidence does not authorize unsupported inputs.
Option C: Give the unsupported indication equal weight with reliable evidence.
Option C, giving the unsupported indication equal weight with reliable evidence, is wrong because weight should follow reliability and support. Treating a weak indication as equal to well-supported evidence would distort the value opinion.
Option D: Treat the absence of data as proof that the subject has no value.
Option D, treating the absence of data as proof that the subject has no value, is wrong because a lack of data for one approach says nothing about whether the property has value. It only limits that particular method of analysis.
Can't support it? Explain it
If an approach cannot be supported with data, do not fake it; leave it out and explain why in the report.
How to use: Use this when a question describes an approach that cannot be developed because of limited data.
Exam Tip
Look for the answer that combines a justified exclusion with disclosure. Answers that invent inputs or treat weak evidence as equal are distractors.
Common Mistakes to Avoid
- -Forcing every approach to be developed with unsupported assumptions
- -Omitting an approach without stating the reasons in the report
- -Confusing lack of data with lack of applicability or value
Concept Deep Dive
Analysis
This question tests how to handle an approach that is conceptually applicable but cannot be developed reliably because data are lacking. Separate the question of applicability from the question of data availability. If the remaining work still supports credible results, the appraiser excludes the approach and states why.
Background Knowledge
Scope of work determines which approaches are needed for credible assignment results. An approach may be omitted when it is not necessary or cannot be reliably developed, provided the omission still allows credible results and the report explains the reasons for the exclusion.
Real-World Application
An appraiser values a single-family home in an area with almost no rental activity, so a reliable income approach cannot be developed. Because sales comparison and cost analyses support credible results, the appraiser omits the income approach and states in the report that insufficient rental data made it unreliable.
More Reconciliation Questions
In a cost approach for an improved property, an appraiser estimates site value by sales comparison, allocation and extraction, then settles on one site-value figure before final reconciliation. How is this step best described?
An extraordinary assumption was reasonably supported, properly used and disclosed in an appraisal report. Later, the assumed information is found to be false. Which conclusion is best supported?
May an appraiser use a hypothetical condition in any assignment?
An appraisal has a current effective date and permits an extraordinary assumption if its requirements are met. Which situation involves uncertain information rather than a fact known to be contrary to reality on that date?
Why must a report identify any real property interest that is being excluded from the value opinion?
Which review best helps explain divergent cost, sales-comparison and income indications?
Two value indications are $340,000 and $392,000. What is the difference as a percentage of the lower indication, rounded to one decimal place?
An unauthorized third party requests a lender-client’s report. No due-process or other permitted disclosure exception applies. How should the appraiser respond?
An appraiser proposes to assume there are no hidden defects. Which fact would characterize that assumption as extraordinary under the USPAP 2024 definition, rather than justify dismissing it as routine boilerplate?
Which considerations provide the soundest basis for reconciling appraisal indications?
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Previous Question
An appraiser assigns the following weights to the approach indications: sales comparison $3,100,000 at 30%; cost $4,900,000 at 50%; income $2,600,000 at 20%. What is the weighted indication, rounded to the nearest dollar?
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