An appraiser is using the sales comparison approach. They have identified three comparable sales with adjusted prices of $480,000, $495,000, and $510,000. The appraiser believes the first comparable is the most similar to the subject, the second is moderately similar, and the third is the least similar. What is the most appropriate final reconciled value for the subject property?
- A$485,000
- B$500,000
- C$495,000
- D$490,000
Show answer & explanationAnswer & explanation
Correct answer: D. $490,000
Reconciliation involves weighing the reliability of each comparable. Since the $480,000 comparable is 'most similar,' it should be given the most weight. The $495,000 is 'moderately similar.' The $510,000 is 'least similar' and should receive the least weight. A value closer to the $480,000 comparable, but still considering the $495,000, would be appropriate. A weighted average might be: (480,000 * 0.5) + (495,000 * 0.3) + (510,000 * 0.2) = 240,000 + 148,500 + 102,000 = $490,500. Option D is the closest and most logical choice, reflecting the higher weight given to the most similar comparable.
Why the other options are wrong
- A. While closer to the most similar comparable, it doesn't adequately reflect the influence of the moderately similar one.
- B. This is an incorrect calculation and does not reflect proper weighting.
- C. This is the simple average, which doesn't account for the varying degrees of similarity.
Reconciliation in Appraisal
The final step in the appraisal process where an appraiser weighs the indications of value from the different approaches (or comparables within an approach) to arrive at a single, final value estimate.
- Not an average, but a judgment process based on reliability and appropriateness
- Appraiser considers data quality, applicability of approach, and confidence in adjustments
- The most relevant and reliable data and approaches are given the most weight
Memory trick: Weigh the evidence, don't just average, to find the true value's leverage.