Do The Comparable Sales Used In The Appraisal Bracket The Final Value?
I would like to take a minute to discuss an issue on real estate appraisal reports that non-licensed appraisal reviewers may, or may not be aware of, but should be. It’s a pet peeve of mine and I think it’s worth bringing to light.
“Some” RE appraisers are not so conscientious about how final value is reconciled on their reports. Rich, what are you talking about? Let’s say: If the value range of comparable sales used on the report is $100,000 to $150,000, on occasion, an appraiser will place their final value opinion above the highest sales price in their report before and after adjustments are applied. If the value range is $100,000 to $150,000 (appraised final value is $180,000). How can this value be proven without a supporting sale that brackets the upper end of the value spectrum? Sounds crazy right? It happens more often than you may think. From the perspective of a reviewer, not having bracketing sales does not make mechanical sense unless you can see the high and low end of the value spectrum given. In theory, you can only substantiate value based on the range of value of the adjusted sales prices given. another point of contention, some appraisers will lean on listing comparables as the final indicator of value even though the sales are not indicative of the value stated because they are not closed sales.
How this happens: Occasionally, an appraiser will accept an assignment where the subject property is superior to all sales available in the data pool. Although the subject’s amenities, characteristics, and features may supersede the quality of its peers, it is often hard to prove its true worth without sales with similar features and quality. If no sales exist to bracket the subject’s characteristic, and in turn its value, then the question of superadequacy must be considered. It seems that sometimes after all adjustments are made in the grid, the appraiser will not take a look at the report to see if all adjustments are consistent and the overall report makes sense regardless of the subject’s superadequacy.
Although there is no written rule or guideline that states that an appraiser must bracket value of comparables given, adjustments and final value conclusions must be supported. Bracketing is a test used to support the reasonableness of a value conclusion. The intended user would find a final value conclusion more supported if it settles within the parameters of the given sales data. Always be aware of the value range of the sales used in the report. See where the final value rests. And lastly, does the value make sense based on the data available?
Richard Demucha – Team Captain, TSI Appraisal