What should the reconciliation section explain to the reader?
Correct Answer
D) Why the indications received the weight they did
The report should explain why particular indications receive greater or lesser reliance. The explanation can be qualitative where appropriate and need not always assign numerical percentages. Merely announcing a final figure or citing the fee does not communicate the analytical basis.
Why This Is the Correct Answer
Option D is correct because the report should explain why particular indications received greater or lesser reliance. Fannie Mae guidance calls for reconciling the reliability of each approach and reporting the approach or approaches given the most weight, and USPAP calls for summarizing the reasoning, including reconciliation of the data and approaches. The explanation may be qualitative and need not assign numerical percentages.
Why the Other Options Are Wrong
Option A: How each approach was mathematically computed
Option A, how each approach was mathematically computed, belongs in the approach sections themselves. Reconciliation explains the weighting of results, not a repeat of the arithmetic.
Option B: Which comparables the client would have chosen
Option B, which comparables the client would have chosen, is irrelevant to an independent opinion. The appraiser selects and weighs comparables based on evidence, not client preference.
Option C: How the fee was allocated across the approaches
Option C, how the fee was allocated across the approaches, has nothing to do with the analytical basis of value. The fee does not explain why indications were weighted as they were.
Reconciliation answers why
The approaches show how numbers were reached; reconciliation shows why some numbers matter more.
How to use: Use this to separate reconciliation content from the content of the individual approach sections.
Exam Tip
When asked what reconciliation explains, pick the answer about reasons for weight. Arithmetic, fees and client preferences are distractors.
Common Mistakes to Avoid
- -Simply restating the final figure without reasons
- -Repeating calculations instead of explaining reliance
- -Believing numerical percentages are required in each report
Concept Deep Dive
Analysis
This question tests what the reconciliation section communicates. The reader needs to understand the reasoning behind the final opinion, especially why some indications were relied on more than others. Look for the answer focused on explaining weight.
Background Knowledge
The reconciliation section bridges the approaches and the final opinion. It addresses the reasonableness and reliability of each approach, the adequacy of the data, and which approaches received the most weight and why.
Real-World Application
An appraiser writes that the sales comparison approach received the most weight because three recent, minimally adjusted sales were available, while the income approach received little weight because few homes in the area are rented.
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?
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?
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?
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Previous Question
Two houses in the same market each have a carefully developed cost approach. One is newly completed and is a proper improvement for its site; the other is 45 years old with several components near the end of their lives. Why is the cost indication usually the more reliable for the new house?
Next Question
Three sales adjust to $300,000, $310,000 and $330,000, with gross adjustments of $85,000, $15,000 and $37,200 respectively. The appraiser assigns 60%, 30% and 10% weight in order of gross adjustment as a share of the adjusted price, smallest first. What is the reconciled indication?