Bracketing, Part Deaux

[Rice Brewer]

Recently, I was told by a pretty large client that my opinion of value had to be bracketed by the adjusted sales prices -- NO SHEITE SHERLOCK. Then came the kicker; "Must be bracketed below the two highest adjusted sales prices..."

A quick tutorial on "MY PERSONAL, professional and unbiased opinion" set them straight.

 

[TJSum]

Recently, I was told by a pretty large client that my opinion of value had to be bracketed by the adjusted sales prices -- NO SHEITE SHERLOCK. Then came the kicker; "Must be bracketed below the two highest adjusted sales prices..."

A quick tutorial on "MY PERSONAL, professional and unbiased opinion" set them straight.

Believe it or not I have reviewed reports that did not have the value opinion bracketed by the adjusted sales prices.......

 

[Atlanta CG]

If you are to use the "best" comparables, and they happened to be priced slightly less than others that may bracket a final value estimate yet be less comparable due to the numbers of adjustments required, by having to bracket are you not violating the ethics rule? i.e., 3 sales, all selling for $400,000, all in the same s/d, same model type, but the subject has been repainted on the exterior and all 3 sales are tired on the outside, and, past sales indicate first things done on a home in the neighborhood is to paint the exterior, then the subject may be worth $405,000. No other sales around that are similar. Do you struggle to find another home higher priced or superior? Or do you come in at $405,000 using the 3 $400k homes and explain? I think that may be what the writer was trying to explain but he put his foot in his mouth by saying too much. I know, I know, put it as a 4th comp but put no weight on it - dumb, in my opinion, pandering to the underwriter.

 

[Mike Garrett RAA]

Remember, many of the "rules" youse guys are quoting do not appear in USPAP and much of the time are for underwriting purposes. Ideally, the appraiser will select comparable properties that are very similar to the subject. The raw sales prices should be both above and below the contract price (if an appraisal for a purchase) but that is not always possible. The gross living area should be similar and, if possible, a little above and a little below that of the subject.

Now, the real important part. The final value conclusion should fall within the range of "adjusted values of the comparable properties" That is the bracketing the underwriters are looking for. All else is icing on the cake. Problems arise when the appraiser fails to adequately comment about how the appraiser arrived at his/her selection of comparables.

I still contend the very best comparable would be...

"the exact same model, next door, that sold yesterday". Zero adjustments! Of course, we all know that rarely happens...that's why there is a grid with certain items listed for adjustment. You should also note the order those adjustments appear because I think Fannie Mae put them in that order on purpose ranking the importance.

 

[Ray Miller]

Selection of Comparable Sales ======================== A very common underwriting practice is to look for "bracketing", or the use of both superior and inferior comparable sales, so that the value estimate is pinpointed by approaching from two directions. This represents the ideal situation, and is not always possible -- in fact, to force "bracketing" may violate the ethics rule of the Uniform Standards of Professional Appraisal Practice (USPAP), because in order to select inferior and superior sales would require a "preconceived opinion of value", which the USPAP forbids.


In this case, all of the comparable sales adjust down to the subject due in part to deferred maintenance, size of acreage, outbuildings, creeks streams, views. (see notes second page of comments section) Nonetheless, the sales comparison analysis is very well supported, as all three comparables are very similar in size, and located very near to the subject. All three comparables are also very similar in design and function to the subject. While the subject is not bracketed by price, it IS bracketed by other features. Therefore the Sales Approach is very well developed and well supported.


In order to find sales that bracket the subject property, it would be necessary to consider sales from other rural subdivisions, rural acreages that are located a good distance away that may not be subject to the same economic and geographic influences as the subject. Therefore the use of these three sales is preferred to the use of an inferior sale from another subdivision or rural area.


What say you on this vergage????

 

[Mike Garrett RAA]

Works for me.

 

[Terrel L. Shields]

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.

agreed...and that doesn't automatically mean one will be higher, one will be lower on every factor affecting value...that is the implication.

Sounds to me like someone is trying to pre-empt the UW as they have had this issue thrown in their face way too many times.

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.

The question is how do they do it? I have seen UWs insist that a subject be bracketed by 1-sales price; 2- SF of GLA; 3-acres of site; 4-value of site; 5- Age of the dwelling; and, lastly dollars per SF...all in the same grid. Maybe so in an area where you have an abundance of comps, but this was a rural area of Oklahoma where the house was 3,100 SF and the largest house less than 5 years old was 3,000. There were not 5 new or near new houses sold in the region within a year. There is no "Spec" market in that region. Only about 3 of the above factors could be bracketed. Only after the LO went over the UW's head and took it straight to a board member of the mortgage co. did the loan get done...on a 40% LTV house. In exasperation, I told them why not take a F$#%ing chainsaw and saw off 1,000 SF - we could bracket that size range and it would STILL be worth more than they were lending....so much for city UWs trying to understand rural property.
They made the loan but the UW still declared the report was unsupportable...The fact the margin of error is greater when you have lesser data does not mean that the margin of error is so great as to face a loss when you are only loaning 40%...made no sense to me whatsoever.

 

[Ray Miller]

Quote:
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.


The first thing you do is look for bracketing and I agree with this statement, but sometimes its just not there in the rural areas. So you have got to write a long story on why.

 

[Ray Miller]

Brought this back to the top. To see if anyone agrees that force bracketing could cause a problem with following USPAP.

I see so many times where appraiser move out of the market area in our rural areas to cause the report to bracket without giving any consideration to other conditions in the area they select the comparable to the area that the subject is in. But they did bracket and stay with in the 15%/25% that so many look for.

What say you?

 

[Marcia Langley]

if anyone agrees that force bracketing could cause a problem with following USPAP.

It could if the appraiser let it. Just as failure to demonstrate the value elements by not doing 'bracketing' could cause a USPAP problem. Which is, I would venture a guess, a more frequent overall occurence.

The appraiser has to take responsibility, either way.