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Which of the following statements is true regarding the process of reconciliation?
a. Every approach is applicable in all assignments
b. Applying the three appraisal approached to value to the same property will typically produce the same figure
c. The most credible reconciliation uses the average of the different three values derived from the three approaches
d. Identical values produced from different approaches are a red flag
(d) Each approach has so many variables that there is a miniscule chance that one value approach will ever match another if performed on the same property. In fact, if it does occur, it should be considered a major red flag.
Which of the following is an instance where an approach is definitely inapplicable?
a. Cost approach not listed on the appraisal form
b. Income approach on a residential subject
c. Cost approach for vacant land
d. Sales comparison approach on a strip mall
(c) One example of when an approach is inapplicable to the assignment is appraising vacant land. There is no physical way of using the cost approach since this method requires the valuing of improvements. Page 416
When using the sales comparison approach, an appraiser should:
a. ensure there is an adequate number of comparable sales
b. double-check all mathematics used
c. re-verify that comparables used are in fact comparable to the subject
d. do all of the above
(d) If the sales comparison approach was used in the assignment, the appraiser should re-verify that the comparables are comparable to the subject property; there is an adequate amount of sales data; the sales data is both accurate and reliable; the logic of adjustments made between subject and comps is in good order; the adjustments are mathematically correct; and the value conclusion drawn from the adjusted comparables is legitimate. Page 418
Out of the different approaches to value, which would most likely yield the highest value?
a. Sales comparison approach
b. Cost approach
c. Income approach
d. They will all yield the same value
(b) If all three approaches were applied to a property, the value derived by the cost approach analysis would probably be the highest, and not entirely represent what that property may sell for on the open market. Page 420
The income approach applies to:
a. income-producing properties only
b. any property type
c. any property that has income potential
d. special-purpose properties that produce income
(c) The income approach is the best indicator of value for income-producing properties; however, if a property is not currently producing income, this approach can convert its potential income into a current value. Page 419
Why should an appraiser round the final value estimate?
a. because numbers confuse clients
b. because exact figures cease to be an estimate
c. to make the estimate easier to read
d. to allow more room for error
(b) The final value estimate should be rounded to the nearest thousand to emphasize the fact that it is indeed an estimate. If an estimate were too distinct, it would cease to be estimate of market value and become too exact for the marketplace. Page 421
While reconciling a final value conclusion, an appraiser should never:
a. reduce the process to a mathematical calculation
b. bend the values to fit a preconceived notion
c. make changes to values, calculations, or data unless a genuine mistake was discovered
d. do all of the above
(d) While reconciling, appraisers should never limit themselves to a mathematical equation, should never bend values to fit preconceived notions, and never make changes to data or values unless truly warranted. Page 422
Regarding appraisal and appraisal reporting, which of the following is true?
a. An appraisal with a summary report requires more work than an appraisal with a restricted-use report
b. self-contained appraisals require the most work out of all appraisals
c. Appraisal reports dictate the amount of detail conveyed to the client, but have no bearing on the amount of work put into an appraisal
d. all of the above
(c) Reports will vary on amount and detail of information disclosed, but the type of report used should never affect how much effort is put into the actual appraisal. Page 423
Which is the most elaborate of the appraisal report options?
(c) The Self-Contained Report is the most elaborate report and contains the most detailed information. page 423
When is a workfile required?
a. When using a restricted-use report
b. When using an oral report
c. When using the narrative style
d. Anytime an appraisal is performed
(d) An appraiser should always keep his or her workfiles in case he or she must revisit the appraisal or defend his or her appraisal. Page 426 - 427