Bracketing, Part Deaux

[Rice Brewer]

The below is for your consideration and discussion. It was lifted from a report I was reviewing.

"A common underwriting practice is to look for "bracketing", or the use of both superior and inferior comparable sales, so that the value opinion is pinpointed by from two directions. In a prefect world, this is desirable but, of course, it is not always possible. In fact, to force "bracketing" may violate the ethics rule of the Uniform Standards of Professional Appraisal Practice (USPAP) to which all appraisers must adhere, as selecting inferior and superior sales would require a "preconceived opinion of value" prior to the complete application of the appraisal process, which USPAP forbids."

 

[Mztk1]

That's a pretty bogus paragraph and also excessively hyperbolic for an "objective" analysis. The "perfect world" thing is unprofessional and condenscending.

When one picks a superior sale and an inferior one, they are not selecting what is better or worse based on sale price, so the warning about a "preconceived opinion of value" is specious. The superior house should be superior in that its net adjustments are a negative adjustment and the inferior sale should have positive net adjustments. Simple as that. If all your sales have negative net adjustments, or all have positive net adjustments, you have not bracketed the overall appeal of the subject.

Don't see how making sure you bracket appeal can be a violation of USPAP in any way, but can see how not bracketing appeal and then putting most weight on the sales comparison approach would. in such a situation, the results would likely not be credible without a long explanation.

 

[Ross (CO)]

Aside from some spelling and syntax issues.....this individual appears to be assisting the underwriter in doing their underwriting. This appraiser should have at least explained what would constitute a "superior" or an "inferior" comparable ! Superior might mean appropriate, fitting, similar, matching, etc., whereas inferior would mean inappropriate, bad fit, dissimilar or no match. What is the mid-point between superior and inferior ? A truly inferior comparable should never be used in the grid, anyway......unless the data choices are grotesquely limited. I do not see any connection with the superior-or-inferior descriptions being a direct assertion of "preconceived opinion of value".

Does this client render any other certain aspect of the total report which prompts their desire for the review ? Was it an apparent awkwardness of the content and reconciliation of the selected comparables ? !

 

[PropertyEconomics]

If you dont select the "best" comparables to measure the value of the subject I would say you are in violation of USPAP. Simple as that.

 

[Rice Brewer]

Thanks. My head was hurting from reading that paragraph and wanted / needed a fresh set of eyes.

 

[David Wimpelberg]

"A common underwriting practice is to look for "bracketing", or the use of both superior and inferior comparable sales, so that the value opinion is pinpointed by from two directions. In a prefect world, this is desirable but, of course, it is not always possible.

It's not just common for underwriters to look for bracketing, but any appraiser with any amount of competence, or any market participant, does it. Any one who says "the range of sales prices in the subject's area is between $200,000 and $400,000 and the subject is in that range" has just bracketed.

If they appraiser states "the range of sales prices in the subject's area is between $200,000 and $400,000 and the subject is worth $500,000" did not bracket, and that should cause concern. A sales price can be inferred, but any user of the report will likely want some reasonable support and explanation.

In fact, to force "bracketing" may violate the ethics rule of the Uniform Standards of Professional Appraisal Practice (USPAP) to which all appraisers must adhere, as selecting inferior and superior sales would require a "preconceived opinion of value" prior to the complete application of the appraisal process, which USPAP forbids."

:Eyecrazy:

It sounds like the appraiser may be violating the Competency Rule.

 

[Rice Brewer]

When one picks a superior sale and an inferior one, they are not selecting what is better or worse based on sale price....

I suspect, but don't really know, that the reason for the paragraph was pressure from some cubicle chained UW that the opinion of value MUST be bracketed by unadjusted sales prices. Hence, the "prefect world" and "preconceived notion of value" comments.

 

[Rice Brewer]

It sounds like the appraiser may be violating the Competency Rule.

You may very well be correct. There is much more in this report that causes me concern.

 

[Kevin Keck]

I suspect, but don't really know, that the reason for the paragraph was pressure from some cubicle chained UW that the opinion of value MUST be bracketed by unadjusted sales prices. Hence, the "prefect world" and "preconceived notion of value" comments.

I think your theory is correct. Most likely this is an appraiser trying not follow an arbitrary underwriting request that all major characteristics must be bracketed. I feel his/her pain but the appraiser is blowing smoke.

 

[George W Dodd]

Too funny; what is bracketing? Depends upon what's at issue. To bracket size and sales price may or may not be relevant to the subject. Once had an UW ask for two more sales because all three were model matches (re-sale) and they didn't "bracket" the subject GAL. Or when I was told I couldn't use three sales that didn't require any adjustments cause you have to adjust for something.
Common sense dictates the use of the best, most appropriate, sales data.