Within the income approach, an appraiser holds indications from direct capitalization and from a gross rent multiplier. What should follow?
Correct Answer
D) Weighing them by the data supporting each
Why this is correct: Reconciliation involves professional judgment about the reliability and applicability of each value indication. The appraiser should assign weight based on the quality and quantity of the data supporting each method and how well each method reflects market behavior for the subject property. Why the other choices are wrong: 'Averaging them into one income indication' is arbitrary and ignores the strength of the underlying data. 'Reporting whichever figure is the higher one' is biased and not supported by analysis. 'Discarding the multiplier as always unreliable' is incorrect; GRMs can be reliable when supported by good data. Exam tip: Weighting is not averaging. Give more credence to the method with the most credible, market-relevant data.
Why This Is the Correct Answer
Why this is correct: Reconciliation involves professional judgment about the reliability and applicability of each value indication. The appraiser should assign weight based on the quality and quantity of the data supporting each method and how well each method reflects market behavior for the subject property. Why the other choices are wrong: 'Averaging them into one income indication' is arbitrary and ignores the strength of the underlying data. 'Reporting whichever figure is the higher one' is biased and not supported by analysis. 'Discarding the multiplier as always unreliable' is incorrect; GRMs can be reliable when supported by good data. Exam tip: Weighting is not averaging. Give more credence to the method with the most credible, market-relevant data.
More Reconciliation Questions
Reconciliation of the approaches to value is best described as which activity?
Why should the reconciliation address the quantity of evidence as well as its quality?
How long must a report be retained compared with the workfile?
What distinguishes an appraisal review from an appraisal?
An appraiser reconciles to a value at the top of the indicated range because the client needs that figure. What has occurred?
What does it mean that a value opinion must be reasonable rather than merely arithmetically derived?
What should the reconciliation section explain to the reader?
How do the content obligations of the two report options differ with respect to the information analyzed?
The three approaches indicate $480,000, $495,000 and $610,000. What should the appraiser do first?
Three approaches indicate $1.02 million, $1.05 million and $1.04 million. How should this be reported?
People Also Study
Real Estate Market
13.6% of exam
Property Description
11.8% of exam
Land or Site Valuation
4.5% of exam
Sales Comparison Approach
16.4% of exam
Cost Approach
13.6% of exam