Bracketing

[VolcanoLvr]

Is 'bracketing' property characteristics in appraisal reports officially "required", or is it merely a desired methodology to make reports "look good" to lenders and investors?

I recently took a class on 'how to choose comparables' and one segment of the class focused on 'bracketing' and included this info:

BRACKETING CAN REDUCE ADJUSTMENTS

~ Bracketing is a basic appraisal method

~ Bracketing can help the appraiser select comparables, reduce adjustment, and makes lenders happy (my emphasis)

Hmmmm. Is our goal as an appraiser actually to make lenders happy?

Or is our goal to properly and accurately appraise the property using available market data using properties similar and reasonably close to the subject, regardless of ‘bracketing’ certain or all characteristics?

 

[J Grant]

Is 'bracketing' property characteristics in appraisal reports officially "required", or is it merely a desired methodology to make reports "look good" to lenders and investors?

I recently took a class on 'how to choose comparables' and one segment of the class focused on 'bracketing' and included this info:

BRACKETING CAN REDUCE ADJUSTMENTS

~ Bracketing is a basic appraisal method

~ Bracketing can help the appraiser select comparables, reduce adjustment, and makes lenders happy (my emphasis)

Hmmmm. Is our goal as an appraiser actually to make lenders happy?

Or is our goal to properly and accurately appraise the property using available market data using properties similar and reasonably close to the subject, regardless of ‘bracketing’ certain or all characteristics?

The instructor is an idiot because the reason to bracket is not to make lenders happy ~! However it is true that clients feel more confident in an appraisal when a key value feature is bracketed ( view, pool, guest house etc )

I think it is ridiculous to bracket low value features such as a fireplace (though some nitpick reviewers ask for it, just say no ). Moving on, the reason we bracket, high value or key features, both positive and negative. ( such as backing a noisy highway ) is if we can find comps with equivalent features or defects, we see market reaction to them both in price and days on the market. The market reaction has evidence vs guesstimating

It is not "required" (by USPAP), doing it to make reports look good to lenders is pathetic. :Bracketing should be done because it serves US as a value indicator, the fact that lenders like it is a bonus- though to be fair, appraisals are supposed to be meaningful to the user.

It is the lenders money and UW decision... it makes them feel comfortable to see the market is paying X more for a lake view by bracketing with a lake view comp, and that yes properties backing to the dump like subject are marketable, 3 backs to a dump.

Sometimes we can;t find good comps to bracket and then just explain the search/attempts made..

 

[J Grant]

Or is our goal to properly and accurately appraise the property using available market data using properties similar and reasonably close to the subject, regardless of ‘bracketing’ certain or all characteristics?

When you choose properties with similar features, that means those features are bracketed! What makes a property similar to the subject? Having key value features the typical buyer for subject looks for - or having a similar defect that typical buyer for subject is willing to accept

 

[Tom4value]

Our "goal"....as in our job, is to provide an appraisal that is credible. Bracketing the GLA, though desirable. is not a "requirement". Our requirement is, see the former. If I can find a 4th, 5fth or 6th comp that is reliable and brackets the GLA, I will. However, do NOT produce a "sale", as in anything, to produce a bracket. That would be misleading, a violation of USPAP. If you do not have a comparable sale that brackets the GLA, say so.

 

[VolcanoLvr]

Tom gets the gold star, so far.

Let's concentrate on the first sentence in my post: "Is 'bracketing' property characteristics in appraisal reports officially "required", or is it merely a desired methodology to make reports "look good" to lenders and investors?"

 

[VolcanoLvr]

Actually, so does J. Grant. Kudos young lady!

The problem, as I see it, is the attitude.....and education...….that our job (as appraisers) is to 'make lenders happy.'

Last time I read USPAP, that's not what it says.

'Making lenders happy' is the end result of the initiative to 'make the sale' no matter how non-conforming or different a property is. And per this attitude, the report better damn well support that desired conclusion. Thus "bracketing" has become the norm in how appraisers are rated in their work. Not the quality of the explanations within the body of the report to help the lender understand the property, and why certain items could not be "bracketed."

"Just give me a perfect number I can use for this mortgage loan sale" and be sure you do that by finding any and all properties that "bracket" each and every line item on the report form. That's ludicrous, but too many appraisers, AMC's....and educators, have fallen into that trap - just to avoid conflict.

 

[J Grant]

Actually, so does J. Grant. Kudos young lady!

The problem, as I see it, is the attitude.....and education...….that our job (as appraisers) is to 'make lenders happy.'

Last time I read USPAP, that's not what it says.

'Making lenders happy' is the end result of the initiative to 'make the sale' no matter how non-conforming or different a property is. And per this attitude, the report better damn well support that desired conclusion. Thus "bracketing" has become the norm in how appraisers are rated in their work. Not the quality of the explanations within the body of the report to help the lender understand the property, and why certain items could not be "bracketed."

"Just give me a perfect number I can use for this mortgage loan sale" and be sure you do that by finding any and all properties that "bracket" each and every line item on the report form. That's ludicrous, but too many appraisers, AMC's....and educators, have fallen into that trap - just to avoid conflict.

Seems you picked up a couple of distorted ideas somewhere.
We should not do our appraisal to "make the sale " We do an appraisal to develop an opinion of value ( and communicate information that lets client make an informed decision)

We bracket to support our opinion of value .( not " to avoid conflict ".

That said, clients do prefer to see bracketing ( and I want to see it on my own reports) because it shows market reaction to a key positive or negative feature of the subject..Bracketing, when possible makes your report more "bullet proof" .

 

[J Grant]

If you have clients that make you bracket each and every item, you have the wrong clients ( or you can't explain to them why it was not done) Bracketing should be for major items of value positive or negative. Substantial site size differences, pool, view, age range of construction, location etc.

For minor items, I explain: "Appraiser searched back 2 years, No similar comps with a fireplace were found. To include a not similar sale needing large adjustments to bracket with a fireplace would create misleading assignment results."
Because no client, even the most idiotic AMC wants to be on the hook for creating misleading
assignment results!!

I usually-don't adjust for a minor item such as small lot difference or a fireplace
I write: " No adjustment is made for a fireplace, because in warm S Fl climate it is not a heat source, and is too minor a value contributor to reliably extract an adjustment amount for. The fireplace was considered qualitatively in the value reconciliation"

This is a proactive explanation. If you make no adjustment, there is no need to bracket . By saying you considered the FP qualitatively in the reconciliation, you show you are not "ignoring" the feature.

 

[J Grant]

One other thing about bracketing ( because I am a big fan of bracketing, if the comps are there for it ) Assuming we are trying to bracket only for the bigger value features/important features. if you can not find a comp with that feature even going back in time or to a relevant competing area , then ask why that is the case. Because not being able to find comp sales with a similar feature might indicate 1) a non conforming subject or 2) an over improvement. That is not written it stone, but it can be the case. If your subjec is a 4000 sf house and the larges similar location sale searching back a few years is 2800 sf, your subject may not be typical for area ( conforming ) and it may be an over improvement

It's been said that lack of sales does not mean lack of value. And that can be true. However, lack of sales and existence of homes with similar features /size etc does show lack of demand,. Because if typical buyers wanted 4000 sf homes in that area, you'd see at least some 4000 sf homes driving around and a couple of sales over time as a result. Lack of demand can affect value., or marketing time ( market exposure estimate)

 

[NachoPerito]

If the appraiser makes adjustments that are WELL SUPPORTED then Bracketing is NOT necessary.

It is only necessary when the client doesn't trust the appraisers's adjustments.... which is most of the time.