Property ValuationIntermediateCalifornia Exam

When reconciling the three approaches to value in an appraisal, the appraiser should:

AAlways average the three indicated values equally, per standard California valuation practice

BSelect only the highest indicated value to protect the client, under standard appraisal methodology

CGive greatest weight to the approach most applicable and reliable given the property type and data qualityCorrect

DEliminate the approach producing the highest value to be conservative, as typically applied in a comparative market analysis

Why Give greatest weight to the approach most applicable and reliable given the property type and data quality Is Correct

Answer C: Give greatest weight to the approach most applicable and reliable given the property type and data quality

Reconciliation is not a mathematical average. The appraiser weighs the reliability and applicability of each approach based on property type, market conditions, and data quality, arriving at a final value opinion that best reflects market value.

Exam Tip: Property Valuation

Valuation questions focus on the three approaches to value: sales comparison, cost, and income. Know which approach is best for which property type. The income approach uses cap rate and NOI — memorize these formulas.

Key Property Valuation Terms in This Question

Appraisal

A professional estimate of a property's market value prepared by a licensed or certified appraiser.

Lien

A financial claim against a property that serves as security for a debt or obligation, giving the creditor the right to foreclose if unpaid.

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Key Terms to Know

Appraisal

A professional estimate of a property's market value prepared by a licensed or certified appraiser.

Lien

A financial claim against a property that serves as security for a debt or obligation, giving the creditor the right to foreclose if unpaid.

Comparable Sales (Comps)

Recently sold properties similar in size, condition, and location used by appraisers and agents to estimate a property's market value.

Capitalization Rate (Cap Rate)

A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.

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