How Precise Do You Need To Be?

[J Grant]

Since this is posted in the review section, if I were reviewing a report with this value conclusion, I would not comment one way or another about the $600, as long as the value conclusion was supported in the appraisal. However, it would indicate that it might be a "rote" number- exactly matching a SC price or from software or averaging. I doubt it came about because the original appraiser thought he was that precise or that good.

 

[J Grant]

Accurate to within $100; that appraiser is really good, or really ignorant. You chose.

I'd round to $1.375M or $1.4M. Rounding to 1.38M implies an accuracy to within $10K or less than 1%. I'd rather round to $25K at that value level unless there is a lot of good, reliable data suggesting otherwise.

OTOH, maybe his adjusted range was $1,379,500 to $1,379,700. $1,379,600 makes perfect sense.

Where do appraisers come up with generic "rules" like this, aka rounding by increments of 25k at a million dollar plus price point? I understand the reasoning behind it, (trying not to be overly accurate ) but imo it is a reasoning that does a dis service in many cases...( granted you deviate from this generic rule at times )

While it is logical and in keeping with market value opinions to round up to the nearest thousand dollars in a value opinion, such as in the OP example, and at times to round up or down 5k with a split number, the generic rounding up or down by significant $ amounts, such as 25k, makes no sense. While one can say that in a million dollar price point, 25k, or less than 1%, is not significant, in real dollars at a closing or settlement, people sure as heck notice a plus or minus of $25,000. It means $25,000 more, or less, to one of the parties, and if financing is involved means a lender ponies up $25,00 more or less ...for no reason other than an appraiser made some generic rule about it? I'd be pretty upset if as an heir, I was shorted 25k because of that at a settlement.

Appraisers have to remember these are dollar amounts that somebody will pay or receive or lend, not abstract numbers. In the OP example, nearly everyone would agree they would round to $1,380,000. So if that is the well supported value opinion, why drop it down to $1,375,0000 or go up to $1,4000,000? Any of these numbers are as "precise " as each other btw so over precision is not avoided.,

 

[Terrel L. Shields]

If you are making adjustments, in increments of $1,000, then your final number isn't going to be more precise than ,000. If you determine a $43/SF adjustment based on numbers that are rounded to the ,000, then the final SF adjustment (say 300 SF x $43) is $13,000, not $12,900.

 

[residentialguy]

No one, myself included, is that good at forming an opinion of value. There are rules for rounding of value same as there are for measurements. Now, that said, if you are taking all the adjusted sales prices, and adding them together, then dividing by the number of comparables(which is the wrong way to do a eeconcilliation), then you can get a number like that.

Actually, OP's example is a good example of an "eeconcilliation"
When I read it, my first thought was "eech"

 

[TRESinc]

No one, myself included, is that good at forming an opinion of value.

some people, myself not included, on here think they are that good don.

 

[Mark K]

Where do appraisers come up with generic "rules" like this, aka rounding by increments of 25k at a million dollar plus price point? I understand the reasoning behind it, (trying not to be overly accurate ) but imo it is a reasoning that does a dis service in many cases...( granted you deviate from this generic rule at times )

,

Its not a generic rule and the fact that you continue to fail to understand the concept of accuracy, precision, significant digits, rounding, etc. is well established on this forum. Attempting to claim what amounts to pinpoint accuracy, beyond that which is supported by the comparable data, is folly, at best.

No amount of discussion or explanation is apparently going to change your notions on the subject and I'll leave it to those more interested to continue the discussion.

 

[Mr Rex]

Maybe his fee was $600 and he thought he added value.

 

[J Grant]

Its not a generic rule and the fact that you continue to fail to understand the concept of accuracy, precision, significant digits, rounding, etc. is well established on this forum. Attempting to claim what amounts to pinpoint accuracy, beyond that which is supported by the comparable data, is folly, at best.

No amount of discussion or explanation is apparently going to change your notions on the subject and I'll leave it to those more interested to continue the discussion.

Can't you debate a topic without getting prickly and personal ? I suppose not.

so to address it on your own level, I do round off my reports up to the next thousand and sometimes p or down in higher increments. But a decision to round up or down 25k is hardly about pinpoint accuracy. I'll leave it at that

 

[Mark K]

"That's pretty crazy- sounds like a software spit out that exact value and he put it in, or matched a SC price. Most appraisers round up to the 1,380,000 or down to the 1, 379,000" From JGrant.

MOST appraisers would NOT round down to $1,379,000. I'm not the one advocating rounding $1K on a $1.4M appraisal; I'm saying $25K is likely more precise and sufficient.

Not trying to be prickly or personal; just stating facts. I've been involved with these discussions with you in the past. I'll leave this particular Sisyphean task to someone else. I have other, more interesting things on which I can waste my time, washing and waxing the cat comes to mind.

 

[Michigan CG]

Most appraisers round up to the 1,380,000 or down to the 1, 379,000

If one has four comparable properties how do they arrive at $1,379,000?

If one understands that a home in this price range is not going to have $1,000 adjustments then they would also understand that you cannot have a final opinion with a significant digit less than what was used in the adjustment process.

If one really thinks about this, let us move the decimal point left two spaces and talk about a house in the $14,000 range. Would anyone with a brain opine to a value of $13,790? Would anyone with a brain make $100 adjustments or $50 adjustments?

I fail to see how some do not get this accepted concept.