How Precise Do You Need To Be?

[J Grant]

That's down to 1.78%. No one is that accurate. You aren't that accurate...except in your mind.

1.78 of WHAT? 1.78 to precision about your own value ? It makes no sense. It is not a math equation in the reconciliation of a value, it is a numerical dollar amount that will be distributed at a closing or settlement.
Appraisals are supposed to represent the market. Prices don't always come in at round numbers, or in increments of 25k at upper price ranges, or any other generic formula

I do round off numbers for simplicity and will round up or down when appropriate, however imposing a rote formula can distort value .

 

[J Grant]

I have not appraised a 10k-15k house- If i did I might not make any adjustments but do it qualitatively-but whatever it takes to solve the problem would be appropriate one assumes.

 

[J Grant]

I have appraised multiple homes for $10,000-$15,000.

Putting these two sentences together shows that you don't understand the concept of significant digits.

I understand them, you fail to understand the reconciliation is about the value, not math. What you call a "significant digit" means thousands of dollars to someone at a closing or settlement based on appraised value.

There are significant digits in sales contracts, prices do not follow a generic rule about always rounding up or down 5k or 10k. Very common to see prices of $171,000 or $278,000, or even $1,897,000 . The last "few digits" of prices is the market speaking- we are supposed to listen.

 

[J Grant]

The notion that since adjustments are not "precise" therefore our point value can not be any more precise than the adjustments is a false equivalency. The non adjusted sale prices can be factored into the reconciliation, making the adjustment argument moot.

In addition, the adjustment phase , where math can be "off", is over with. The reconciliation phase is a separate phrase of the appraisal., where many factors including the results of the different approaches and qualitative aspects can ensure the reconciliation is not dependent on whether an individual adjustment is this or that.

 

[Mr Rex]

A thousand here and a thousand there and after a while your are talking real money...

 

[J Grant]

I sold real estate as an agent at one time. Perhaps some fail to understand how buyers and sellers negotiate . In many cases, that last few thousand dollars is a deal maker or deal breaker. Any RE agent will tell you deals die because the parties are apart by $3000 or even $2000.. If increments like this matter to buyers and sellers ( the market) they should matter to the appraiser. Rounding up or down in larger increments than what matters to the market is not reflecting the market, it is reflecting a rote formula, despite the rational for using a formula.

 

[TRESinc]

A 14k house is absurd, so why bring it up? The cheapest property ( a small condo) I ever appraised was about 50k. The nearest number I would round to in the 50k range would be $500- if there was a reason to do so. Many properties in the lower price ranges will have contract prices and sale prices ending in $500- such as $62,500 so rounding to that or to $1000 reflects the market.

In the million dollar range, I would tend to round to $1,380,000 rather than $1,379,000 ...but If for a specific assignment there was reason to opine at $1,379,000 it could happen. I don't make adjustments in 1k increments in any but the extreme low price ranges . However, when we are in the reconciliation phase we are out of the adjustment phase of the appraisal. The reconciliation phase is the totality of the appraiser's judgement of where to opine from the approaches and qualitative comparison of the comps and their ranking, and part of where to reconcile is also influenced on market trends or intrinsic quality of the subject property.

so on a 6 digit property you will round by +/-1% ($50,000 price point, $500 adjustment) but when you get to a 7 digit property adjustments are rounded to +/-0.1% (1,380,000 vs 1,379,000)? doesn't seem very consistent...

 

[Deleted member 134708]

A 14k house is absurd, so why bring it up?

Now we don't have to listen to you.

Your statement says it all.

 

[J Grant]

so on a 6 digit property you will round by +/-1% ($50,000 price point, $500 adjustment) but when you get to a 7 digit property adjustments are rounded to +/-0.1% (1,380,000 vs 1,379,000)? doesn't seem very consistent...

I personally would likely not round to $1,379,000 and be inclined to 1,380,000- the example I gave was in response to the OP where he had an appraisal at $1,379,600 - the better choices would be up or down to round off at an even thousand.

 

[J Grant]

Now we don't have to listen to you.

Your statement says it all.

You don't listen well to anything much judging by your posts..I felt a 14k house was an absurd example since topic of OP thread was over a million dollar price point, but if people want to talk about appraising in the 10-15k range, I'll participate.