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  #1  
Old 11-23-2010, 02:45 PM
Metropolis Metropolis is offline
 
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Default USPAP Compliant Reconciliation

So I've been requested to provide a USPAP compliant reconciliation. This is what I have...

Most weight is given to the Sales Comparison Approach as it best reflects the actions of buyers and sellers in the subject's market. The Cost Approach is not considered as reliable on older homes or when depreciation is significant but has been completed at the lenders request. The Income Approach is not applicable in this particular single family market that lacks motivation to purchase or sell based on a properties income potential.

What's not compliant about that? Thanks for the input.
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  #2  
Old 11-23-2010, 03:03 PM
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zdfenton zdfenton is offline
 
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With USPAP a final reconciliation is all about applicability and relevance of approaches, which you've mostly covered. For clarity's sake you should state the cost approach is applicable but less relevant and was given secondary weight. I don't think it's necessary to state it was done only at the lender's request
  #3  
Old 11-23-2010, 03:05 PM
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Michigan CG Michigan CG is offline
 
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Here is what I was taught. A letter of transmittal tells the reader what they are going to tell them in the following appraisal report. (I personally do not include a letter of transmittal with my residential reports.)

Then you have the appraisal where you tell them what you are telling them. Then you have the Reconciliation of Value where you tell them again what you just told them.

A reconciliation should tell the reader why you were at a certain value. Say your comparables adjust to $155,000-$170,000; why did you pick $155,000 or $160,000 or $170,000?

Which property gave you the best market evidence to go by? Which property is considered the least likely indicator of value.

What you have provided could be applied to almost any single-family home in the world. There is nothing property specific, nothing that reconciles this particular property. What you state could apply to any house anywhere.
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  #4  
Old 11-23-2010, 03:17 PM
Metropolis Metropolis is offline
 
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I'm sorry, he specifically asked for a "USPAP compliant reconciliation of the Income Approach".
  #5  
Old 11-23-2010, 03:39 PM
Mary Tiernan Mary Tiernan is offline
 
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In reading FIRREA, I noticed it requires a letter of transmittal. I'd have to search it to find it again, but, I wonder, is FIRREA not in effect anymore?
  #6  
Old 11-23-2010, 03:39 PM
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CANative CANative is online now
 
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The income approach was not necessary in developing credible assignment results. Single family residential property is not typically purchased for it's ability to generate income and this approach does not address factors and conditions present in the assignment.
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  #7  
Old 11-23-2010, 03:40 PM
BRCJR BRCJR is offline
 
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Quote:
Originally Posted by Michigan CG View Post
Here is what I was taught. A letter of transmittal tells the reader what they are going to tell them in the following appraisal report. (I personally do not include a letter of transmittal with my residential reports.)

Then you have the appraisal where you tell them what you are telling them. Then you have the Reconciliation of Value where you tell them again what you just told them.

A reconciliation should tell the reader why you were at a certain value. Say your comparables adjust to $155,000-$170,000; why did you pick $155,000 or $160,000 or $170,000?

Which property gave you the best market evidence to go by? Which property is considered the least likely indicator of value.

What you have provided could be applied to almost any single-family home in the world. There is nothing property specific, nothing that reconciles this particular property. What you state could apply to any house anywhere.
I agree with your perspective on this. I review and review only for my employer, a lender, and find that most do a less than desirable job in the
Final Reconciliation area.
  #8  
Old 11-23-2010, 03:46 PM
stefan olafson stefan olafson is offline
 
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USPAP DOES NOT specify what must be included in a reconciliation. Ask the person who requested it to show you where in the USPAP document it specifies what has to be in a reconciliation.

A reconciliation is an appraisal of the appraisal, as I was taught. What did you do in the appraisal, what are the strong points that support value, what didn't you do because it was not relevant or not necessary? Why did you come up with a final number rather than a range? It could be as simple and compact or as long as you like. Just tell the reader why you arrived where you did and how did you get there. Be specific, not to vanilla.
  #9  
Old 11-23-2010, 03:53 PM
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Michigan CG Michigan CG is offline
 
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Quote:
Originally Posted by stefan olafson View Post
USPAP DOES NOT specify what must be included in a reconciliation. Ask the person who requested it to show you where in the USPAP document it specifies what has to be in a reconciliation.

A reconciliation is an appraisal of the appraisal, as I was taught. What did you do in the appraisal, what are the strong points that support value, what didn't you do because it was not relevant or not necessary? Why did you come up with a final number rather than a range? It could be as simple and compact or as long as you like. Just tell the reader why you arrived where you did and how did you get there. Be specific, not to vanilla.
Completely agree with my emphasis.
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  #10  
Old 11-23-2010, 03:54 PM
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Quote:
Originally Posted by Metropolis View Post
I'm sorry, he specifically asked for a "USPAP compliant reconciliation of the Income Approach".
He must not be an appraiser.
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