Property Valuation
A Florida appraiser uses three valuation approaches and determines values of $310,000, $318,000, and $305,000. The final appraised value is $312,000. This final determination reflects:
AA simple mathematical average
BThe appraiser's professional judgment (reconciliation) giving most weight to the most reliable approach✓ Correct
CThe highest of the three values
DState-mandated averaging formulas
Explanation
In reconciliation, the appraiser does not simply average the three approaches but exercises professional judgment to weight each approach based on the type of property and the quality/quantity of available data, arriving at a single opinion of value.
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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.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
Capitalization Rate (Cap Rate)A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
Gross Rent Multiplier (GRM)A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
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