California Real Estate SalespersonProperty Valuation and Financial AnalysisEasy
An appraiser develops three separate value indications for the same property: $250,000 by the cost approach, $245,000 by the sales comparison approach, and $238,000 by the income approach. In the final step of the appraisal process, how should the appraiser arrive at a single value opinion?
- AAverage the three figures mathematically to get $244,333
- BWeigh each approach based on its reliability and appropriateness for this property type, giving more weight to the most relevant approach
- CAlways select the income approach figure because it reflects market rents
- DSelect the highest value to protect the seller's interest
Show answer & explanationAnswer & explanation
Correct answer: B. Weigh each approach based on its reliability and appropriateness for this property type, giving more weight to the most relevant approach
Reconciliation is the final step where the appraiser judges the relative reliability and applicability of each approach for the specific property and market, then gives more weight to the most dependable indication rather than simply averaging or always favoring one approach.
Why the other options are wrong
- A. Simple averaging ignores differences in reliability of each approach and is not proper reconciliation.
- C. No single approach is automatically favored; it depends on property type and data quality.
- D. Value opinions must be objective, not chosen to favor a party.
Reconciliation
The final step in the appraisal process where the appraiser analyzes the value indications from the three approaches and forms a single, supported opinion of value.
- Not a simple average
- Based on reliability, quantity, and quality of data
- Different property types favor different approaches
Memory trick: Reconcile = weigh, don't just average