When I look at an appraisal and I see something that is not bracketed, I look for an across the board adjustment. An across the board adjustment is just what it sounds like — same-direction adjustments to all comparable sales.
If all comparable sales are adjusted significantly up or down, this is a red flag. That is not to say that the comparable sales are bad or that there were better sales available, it just tells me to look in the report for explanation about the lack of bracketing and support for the adjustment.
There are many cases where bracketing is not possible. However, when that is the case, I look for the appraiser to explain why and establish that the feature, or lack thereof, is accepted in the market. Additionally, since I have no upper and lower limits to help establish the reasonableness of an adjustment, I often look to make sure that the appraisal has explained and supported that adjustment.
In conclusion, bracketing is a best practice when it is reasonable. However, be mindful that there are many times that it may not be practical, and this does not reflect on the quality of the report. While a Realtor would not usually go into such in-depth analysis as an appraiser with the specific dollar adjustments, performing a simplified qualitative analysis that looks at homes that are both inferior and superior can provide a decent value estimate of the home that is based on actual market sales activity.
By picking a sale that is superior to the subject you know what the high end of the range is, and the inferior sale would reflect the lower end of the range. This method also lends credibility to the Realtor who provides sales information to the appraiser. By including sales that are above and below the list or contract price the Realtor could not be accused of trying to influence the appraiser with only the high price sales.
What method do you use for coming up with a list price? Leave me a message below, I would appreciate hearing from you about your methods. If you have any real estate appraisal related questions you can call me at Thank you so much for the excellent blog.
There are two items I have observed in San Diego County that impact the amenity values for owned solar and swimming pools. Both seem to be driven by outside forces or Macro Economic forces and another by what I would term as a local Micro Economic force. As an example; Due to the high cost of electrical energy and the CA water shortage the market value of owned solar has increased, nearly matching the installation costs, while the value of a pool has typically diminished due to the high cost of water and local civic pressure, social pressure and fines to reduce water usage.
So both solar and pools reflect the impact of Macro Economic issues. As pools have become less desirable in affordable tract neighborhoods pool values in estate or luxury neighborhoods have remain the same or increased. You might call them Trophy Pools, the bigger the better. Your thoughts? It goes to show you that an amenity in one area may not be as important to buyers as in another area.
Thanks for sharing. Tom, When I am working with a seller to prepare their listing, I use this exact technique among a few others to establish a price range rather than an exact amount. I then explain how positioning the home at different points in that range will likely affect showing traffic and thus potential offers. Finally I ask the client s to make the final decision. For me this process utilizes the best approaches and techniques that I have learned from my mentors, including you, to serve my client from a professional valuation standpoint while making it clear which hat I have on, that of a Realtor not an appraiser.
The final step also leaves the door open for discussions regarding price reduction should the need arise. How does this approach sound to you? Thanks for all you do especially going above and beyond the simplest description of you role in the real estate community to help us all grow and maximize our potential and that of our wonderful city!
Thanks so much for the compliments Bob, I really appreciate it. It sounds like you are doing a good job of using market data to develop an asking price. I think this is best in the long run because it will all be revealed during the mortgage appraisal. Notice the value conclusion flows smoothly and credibly from the line of reasoning which, in turn, flows smoothly from the premise.
Up to now, everything the appraiser has done to arrive at a value conclusion has been clear, well-explained, and based on market data. So, consider the conclusion:. To review then, to arrive at a credible value there is first a credible premise, then there is a credible line of reasoning, the unavoidable, logical, and linear results of which are a credible conclusion.
A credible premise has its foundation in the appraiser finding , verifying , and then analyzing all of the data necessary for credible assignment results. Then, a credible line of reasoning has its foundation in the credible analysis of the data the appraiser has amassed and verified. There are many ways to analyze data credibly, one of which is ranking, which is the center of this article, although by no means the only credible [6] manner to analyze real estate sales data.
Finally, a credible premise, followed by a credible line of reasoning, leads inescapably to a credible conclusion. Our anniversary, a special occasion, is next week. However, that it is one way of many they reach that decision is essentially beyond debate.
In other words, the subject has a value higher than the highest inferior sale, yet a value lower than the lowest superior value. However, this unadjusted range will be rather wide. Thus merely choosing a number randomly from somewhere in the middle of that unadjusted range is not an acceptable protocol in the formation of a credible value opinion.
From this array of adjusted sales, the appraiser will have narrowed the absolute spread of the range of sales. Again, the implication is that the final value opinion will have come from this narrowed range. Finally, as a direct result of the premise and the line of reasoning, the appraiser winds up with a narrow range of sales prices.
From this narrowed range, the appraiser then chooses a final value opinion and, more importantly, explains why this single number is more applicable to the subject than any of the other numbers within that range. So, the take-away here is that while ranking the sales both pre- and post-adjustment has some subjectivity to it, the markets from which we garner the data are also subjective, thus subjectivity in forming a credible value opinion is inevitable.
Such a credible conclusion is the result of a credible line of reasoning, all of which stems from the foundation of a credible premise [10]. Ranking the comparables, as described here, is another tool for the appraiser to use to support the formation of a credible value opinion. Have more questions? The author gratefully acknowledges the contributions of Rachel Massey, SRA, in the preparation and architecture of this monograph.
The author, however, takes full responsibility for the contents. Property Values. January 1. General My Favorite Blogs:. Sites That Link to This Blog:. Sales Prices. Adjusted Sales Prices.
0コメント