A house has ample verified competitive sales, while its cost and rental inputs are less reliable. Which approach should receive most weight?
Correct Answer
D) Sales comparison, because the stipulated market evidence is stronger.
Under these facts, sales comparison has the strongest evidentiary support. The result follows the relative relevance and reliability of the inputs, not a universal rule about houses. Evaluate and explain the treatment of the other indications.
Why This Is the Correct Answer
Option D is correct because the sales comparison approach is preferred when reliable market data are available, and here the verified competitive sales are stronger than the cost and rental inputs. A sales comparison indication is direct evidence of the market's opinion of value. The weighting follows the relative reliability of the inputs in this assignment.
Why the Other Options Are Wrong
Option A: Income, because it produces the lowest and most conservative indication.
Option A favors income because it produces the lowest, most conservative indication. Reconciliation aims at the most reliable estimate, not the lowest, and the rental inputs here are less reliable.
Option B: Cost, because replacement cost is a dollar amount.
Option B favors cost because replacement cost is a dollar amount. All three approaches produce dollar figures, so this says nothing about reliability, and the cost inputs here are weaker than the sales evidence.
Option C: All approaches equally, since each was developed.
Option C weights all approaches equally since each was developed. Development does not establish reliability, and equal weight would give the weaker cost and rental inputs as much influence as the strong sales evidence.
Strongest evidence leads
Whichever approach has the best verified data for this property takes the lead in reconciliation.
How to use: Use this when a stem compares the reliability of each approach's inputs.
Exam Tip
Read the facts about data quality in the stem; the answer usually follows them rather than a general rule about property types.
Common Mistakes to Avoid
- -Choosing the lowest indication as the most conservative
- -Weighting approaches equally because each was developed
- -Treating the sales comparison preference as a universal rule regardless of data
Concept Deep Dive
Analysis
This question tests matching weight to the strength of evidence under stated facts. Ample verified competitive sales provide direct evidence of market behavior, while the cost and rental inputs are less reliable. Under those facts, sales comparison deserves most weight, and the treatment of the other indications should be explained.
Background Knowledge
Sales comparison reflects what buyers have actually paid for competing properties, giving it strong support when reliable sales exist. Cost and income approaches can be equally or more persuasive when their data are stronger or the property type calls for them. The appraiser weighs approaches by the evidence in the specific assignment.
Real-World Application
In a busy subdivision, an appraiser finds several verified recent sales of similar homes. Construction cost data are dated and few comparable rentals exist. The appraiser gives primary weight to sales comparison and explains the limits of the other approaches.
More Reconciliation Questions
Which stated cause of supported value loss is external?
Improvement cost new is $450,000. Separately supported improvement depreciation deductions of $45,000, $25,000, $15,000 are expressly nonoverlapping and not already excluded from cost new. Add supported site value of $125,000, already reflecting any site losses. What total indicated value results?
Which two depreciation categories may each be classified as curable or incurable by comparing the cost to remedy a deficiency with the value gained?
Improvement cost new is $800,000. Separately supported improvement depreciation deductions of $120,000, $80,000, $40,000 are expressly nonoverlapping and not already excluded from cost new. No site is included. What depreciated improvement amount results?
The principle of anticipation in real estate valuation states that:
Which highest-and-best-use criterion addresses whether a proposed use is allowed by zoning and applicable legal restrictions?
Three comparables produce adjusted indications of $312,000, $309,000 and $315,000, requiring gross adjustments of 9%, 14% and 22% respectively. Verification also establishes that the first sale is the closest competitive substitute and its adjustments are better supported than the other two. Which indication deserves the most weight on those facts?
When reconciling value indications from the three approaches to value, an appraiser should:
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In reconciliation, an appraiser should:
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A comparable cash price is $450,000. Apply a supported total 2% market increase to that price, then a separately supported −$15,000 condition adjustment expressed in effective-date dollars. No other adjustments apply. What adjusted price results?
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The subject property's potential gross rent is $120,000 per year, with combined vacancy and collection loss of 8% of rent and no other income. All annual property expenses, including real estate taxes and reserves but excluding debt service, total $35,000. The overall rate is 9.5%. What is the indicated value, rounded to the nearest dollar?