Florida Real Estate Broker ExaminationValuation and Market AnalysisMedium
An appraiser is working on a valuation report and has completed calculations using the Sales Comparison Approach, the Cost Approach, and the Income Capitalization Approach. The results are $320,000, $310,000, and $325,000, respectively. The appraiser determines that the Sales Comparison Approach is the most reliable for this particular residential property due to an abundance of recent, highly similar sales. What is the next logical step the appraiser should take?
- ASelect the highest value, as it represents the optimal market price.
- BReconcile the values to determine a single final value estimate.
- CRequest additional comparable sales to validate the highest value.
- DAverage the three values to arrive at a final estimate.
Show answer & explanationAnswer & explanation
Correct answer: B. Reconcile the values to determine a single final value estimate.
After applying multiple valuation approaches, an appraiser must reconcile the indicated values to arrive at a single, final value estimate. This involves weighting the approaches based on their reliability and applicability to the specific property and market data available.
Why the other options are wrong
- A. Selecting the highest value is arbitrary and does not reflect a sound appraisal methodology.
- C. While more comparables can always be useful, the question implies the sales comparison approach was already deemed most reliable; the next step is to finalize the value.
- D. Averaging is generally not considered a best practice in appraisal; reconciliation involves judgment and weighting.
Reconciliation (Appraisal)
The final step in the appraisal process where the appraiser critically evaluates the indicated values from different approaches to arrive at a single, well-supported final value estimate.
- Not an average of the values.
- Involves weighting the reliability and relevance of each approach.
- Requires professional judgment based on the property type and available data.
Memory trick: Reconcile the Choices, Focus on the Best!