California Real Estate SalespersonProperty Valuation and Financial AnalysisMedium
An appraiser is using the sales comparison approach for a residential property. They have selected three comparable sales. Comparable 1 sold for $620,000, Comparable 2 for $645,000, and Comparable 3 for $630,000 after all adjustments. The appraiser believes Comparable 2 is the most similar to the subject property and should be given the most weight. What is the final step the appraiser will perform?
- ACalculate the average of the adjusted sales prices.
- BReconcile the adjusted sales prices to arrive at a single value estimate.
- CDetermine the highest and best use of the property.
- DApply the principle of substitution.
Show answer & explanationAnswer & explanation
Correct answer: B. Reconcile the adjusted sales prices to arrive at a single value estimate.
After adjusting comparable sales, the final step in the sales comparison approach is reconciliation. This involves critically reviewing the adjusted prices, weighing them based on their reliability and similarity to the subject, and forming a single, supportable value estimate.
Why the other options are wrong
- A. Averaging is a simple method but doesn't account for differing reliability of comparables.
- C. Highest and best use is determined earlier in the appraisal process, not as the final step after adjustments.
- D. The principle of substitution is an underlying concept, not a final step in the process.
Reconciliation (Appraisal)
The final step in the appraisal process where the appraiser reviews and weighs the various value indications (from different approaches or comparables) to arrive at a single, final value estimate.
- Not an average, but a judgment process
- Considers reliability, quantity, and quality of data
- Leads to the final opinion of value
Memory trick: Reconcile to Finalize the Value