In an Appraisal Report where sales comparison alone is sufficient for credible results and applicable assignment requirements, what should reporting address?
Correct Answer
A) The rationale for not developing the other approaches
Develop the approaches necessary for credible assignment results and explain the exclusion of approaches in the applicable reporting context. A single developed approach does not inherently make the result less reliable. A client waiver cannot excuse an approach needed for credibility or an applicable program requirement. The relevant report should communicate the actual analytical scope and rationale.
Why This Is the Correct Answer
Option A is correct because when only the sales comparison approach is developed, an Appraisal Report must state the reasons for excluding the cost and income approaches. This tells the reader the actual analytical scope and why it was sufficient for credible results.
Why the Other Options Are Wrong
Option B: Placeholder analyses of the other approaches, made up to fill the headings
Option B calls for placeholder analyses of the other approaches made up to fill the headings. Fabricated analyses would misrepresent the scope of work; the report should instead explain why those approaches were not developed.
Option C: An automatic declaration that one approach is less reliable
Option C requires an automatic declaration that one approach is less reliable. Developing a single approach does not inherently make the result less reliable, and no such declaration is required.
Option D: A client waiver replacing responsibility for credible scope
Option D relies on a client waiver to replace responsibility for a credible scope. A client cannot waive an approach that is needed for credible results; the appraiser remains responsible for the scope of work.
Skipped it? Say why
Every approach you leave out needs a reason in the report. Don't fake it, just explain it.
How to use: Use this when a question asks what reporting must address about undeveloped approaches.
Exam Tip
Look for the choice about explaining exclusions; choices involving fabricated content or client waivers of credibility are not acceptable.
Common Mistakes to Avoid
- -Filling empty approach sections with token analysis
- -Assuming one approach automatically weakens the conclusion
- -Relying on a client request to excuse a needed approach
Concept Deep Dive
Analysis
This question tests USPAP reporting when an approach is not developed. The appraiser develops the approaches needed for credible results and must explain why any of the sales comparison, cost or income approaches were excluded. The report should reflect the actual scope of work.
Background Knowledge
USPAP requires appraisers to develop the approaches necessary for credible assignment results. In an Appraisal Report, the appraiser must state the reasons for excluding any of the three approaches not developed. This keeps the report honest about what analysis was actually performed.
Real-World Application
An appraiser values a vacant lot in an active subdivision with many recent lot sales and develops only the sales comparison approach. The report explains that the cost approach does not apply to vacant land and that lots are not typically rented, so the income approach was not developed.
More Sales Comparison Questions
Supported adjustments are: non-market financing $10,000, GLA $36/sf, garage $3,500 per car, pool/spa $12,500. A comparable identical to the 2,800 sf subject sold for $267,000 with non-market financing. What is its adjusted price?
Using GLA $36/sf and non-market financing $10,000: a 3,100 sf comparable sold for $277,000 with non-market financing; the subject has 2,800 sf. Bath count differences are not adjusted. What is the adjusted price?
Using garage $3,500 per car and pool/spa $12,500: a comparable with a 2-car garage and a pool/spa sold for $268,000. The subject has a 3-car garage and no pool. What is the adjusted price?
Using GLA $36/sf, garage $3,500 per car and pool/spa $12,500: a 2,600 sf comparable with a 2-car garage and a pool/spa sold for $264,000. The subject is 2,800 sf with a 3-car garage and no pool. What is the adjusted price?
In a neighborhood with declining values and marketing times over six months, what must Fannie Mae lenders confirm about the sales comparison analysis?
A house is a 4,000 square foot home in an area of 2,000 square foot homes. How must the appraiser treat this over-improvement in the sales comparison grid?
According to the Interagency Appraisal and Evaluation Guidelines, which items should an appraisal’s market conditions discussion include?
A comparable listed at $420,000 and sold for $399,000. What sale-to-list price ratio (sale price ÷ list price) does this indicate?
An appraiser wants to describe the neighborhood boundaries in a Fannie Mae report. Which approach is acceptable?
Which of these is listed by Fannie Mae as a sales or financing concession?
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Previous Question
An appraiser runs a regression of sale price on gross living area for 38 sales of ranch homes in a subdivision over the past year. Most sales fall within about $10,000 of the fitted line, but one sale, a 1,600-square-foot home, closed at $268,000, about $55,000 below the price the line predicts for its size. Its MLS record has no remarks on condition, financing or terms. What should the appraiser do next?
Next Question
A comparable listed at $420,000 and sold for $399,000. What sale-to-list price ratio (sale price ÷ list price) does this indicate?