Why can two approaches applied to the same property produce indications of different interests?
Correct Answer
B) Because income data may reflect a leased fee position
Why this is correct: The income approach often uses actual contract rents from existing leases, which reflect the leased fee estate (landlord's interest). The sales comparison approach typically uses sales of unencumbered properties, reflecting fee simple value. Failing to align the property interests can cause inconsistent indications. Why the other choices are wrong: "Because the approaches use different effective dates" is a separate issue. "Because the cost approach excludes the land value" is false; the cost approach includes land value. "Because sales comparison ignores property rights" is false; sales comparison must consider property rights conveyed. Exam tip: Always check that each approach is valuing the same property interest.
Why This Is the Correct Answer
Why this is correct: The income approach often uses actual contract rents from existing leases, which reflect the leased fee estate (landlord's interest). The sales comparison approach typically uses sales of unencumbered properties, reflecting fee simple value. Failing to align the property interests can cause inconsistent indications. Why the other choices are wrong: "Because the approaches use different effective dates" is a separate issue. "Because the cost approach excludes the land value" is false; the cost approach includes land value. "Because sales comparison ignores property rights" is false; sales comparison must consider property rights conveyed. Exam tip: Always check that each approach is valuing the same property interest.
More reconciliation Questions
An appraiser is told the property has no environmental contamination and cannot verify it. How should this be handled?
Reconciliation of the approaches to value is best described as which activity?
Significant appraisal assistance from a person who does not sign the report must be treated how?
In appraising a hotel as a going concern, what must be allocated?
What does it mean to say an approach is not applicable to an assignment?
Which of the following is a written report option named in the current edition of USPAP?
What distinguishes qualitative from quantitative analysis in the sales comparison approach?
Why should the reconciliation address the quantity of evidence as well as its quality?
An appraisal report includes an addendum explaining the adjustment derivation. How does this affect compliance?
An extraordinary assumption proves false after the report is delivered. What follows?
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