Can someone explain "bracketing"?

[gemstatejake]

My inclination is to always find the most similar comparable sales I can. Lately my mentor is quite often throwing out the comps I find and using others that "bracket" better but are not necessarily similar to the subject. What am i missing here?

I understand this on the final reconciliation line. But what other characteristics must "bracket"?

 

[Pilgrum]

Your mentor places too much emphasis on following "guidelines".

 

[Tom Woolford]

Your mentor places too much emphasis on following "guidelines".

Your mentor is tired of anal underwriters with checklists kicking back otherwise perfectly good reports.

 

[EddieB]

Some lenders require features to be bracketed to avoid straight line adjustments (ie, hla, large detached garages/buildings etc.). I try to bracket large adjusted items too but don't let that deter you from using the most representative comparables. Sometimes it may take 6-9 comps, just place the most weight on the ones you determine are the best and provide adequate commentary. This may help avoid underwriter headaches.

 

[Mike Kennedy]

If an FHA assignment see 4150.2 Appendix D, Pg D-6

[FONT=Verdana, Arial, Helvetica]Comparable Selection
At a minimum, comparable selection should be based on properties having the same or similar locational characteristics as well as physical characteristics which includes: style, age, size, utility and condition.[/FONT]
[FONT=Verdana, Arial, Helvetica]
Comparable sales should never be selected based on sales price.

In selecting comparables, use the bracketing method. Bracketing, as defined in The Dictionary of Real Estate Appraisal, Fourth Edition, Appraisal Institute, is:

“a process in which the an appraiser determines a probable range of values for a property by applying qualitative techniques of comparative analysis to a group of comparable sales. The array of comparable sales may be divided into two groups – those superior to the subject and those inferior to the subject.

The adjusted sales prices reflected by these two groups limit the probable range of value for the subject and identify a bracket in which the final value opinion will fall.” It is advisable to bracket sales using both dwelling size and sales price whenever possible. If bracketing is not possible, the appraiser should explain why." [/FONT]

 

[Mike Kennedy]

If GSE Assignment:

Selection of Comparable Sales​

The appraiser must perform a neighborhood analysis in order to identify the area that is subject to the same influences as the property being appraised (based on the actions of typical buyers in the market area). The results of a neighborhood analysis enable the appraiser not only to identify the factors that influence the value of properties in the market area, but also to define the area from which to select the market data needed to perform a sales comparison analysis.​

The appraiser is responsible for determining which comparables are most appropriate for the assignment. Fannie Mae expects the appraiser to account for all factors that affect value when completing the analysis.​

Part B, Origination Through Closing
Subpart 4, Underwriting Property
Chapter 1, Appraisal Guidelines, Appraisal Report Assessment​

June 30, 2010

Printed copies may not be the most current version. For the most current version, go to the online version at​

http://www.efanniemae.com/sf/guides/ssg/. 533

 

[gemstatejake]

If GSE Assignment:

Selection of Comparable Sales
The appraiser must perform a neighborhood analysis in order to identify the area that is subject to the same influences as the property being appraised (based on the actions of typical buyers in the market area). The results of a neighborhood analysis enable the appraiser not only to identify the factors that influence the value of properties in the market area, but also to define the area from which to select the market data needed to perform a sales comparison analysis.​

The appraiser is responsible for determining which comparables are most appropriate for the assignment. Fannie Mae expects the appraiser to account for all factors that affect value when completing the analysis.​

Part B, Origination Through Closing
Subpart 4, Underwriting Property
Chapter 1, Appraisal Guidelines, Appraisal Report Assessment​

June 30, 2010

Printed copies may not be the most current version. For the most current version, go to the online version at​

http://www.efanniemae.com/sf/guides/ssg/. 533

Would you care to elaborate on this statement ? Specifically as to how it would relate with bracketing? Been doing some fannie mae stuff...This seems like something I need to understand.

Thanks you in advance and thanks to you guys who responded. Very helpful.

 

[EvalueMator]

^yeah, what he said

{comps larger GLA subject comps smaller GLA}
{comps 3/C garage subject 2/C comps 1/C garage }
{comps inground pool subject above comps w/ none }
{comps 2 fireplaces subject 1 F/P comps w/ none}

after all is said and done, the adjusted values at the bottom of the grid should reflect a range of figures that bracket ALL of the significant characteristics of the subject -that is, those characteristics that contribute to its value

I think the AMC's and underwriters are increasingly using both "guidelines" as mentioned above, but also software that is able to extract and "scan" these reports before anybody even sees them ... in some attempt at uniformity. If the little 6 boxes that report comps #1-#6 GLA doesn't have values both above and below that reported for subject GLA, then the report is "conditioned" immediately sometimes. HOORAY!

 

[Autazell]

Simply put, your first priority should always be completing a USPAP compliant report. Once you have done that, you are free to implement secondary lender requirements (additional requirements like bracketing that fannie mae, your client, and their reviewers think are important) as long as they were part of your scope of work and do not infringe on the integrity of your USPAP complaint report.

Instead of replacing the comparables you think are most similar with ones that simply bracket, your supervisor should be asking you to add an additional comparable that would fulfill your clients secondary lender requirement. Finding a way to make your clients happy while following the rules is a valuable appraiser tool and one you will need to master if you want to be a successful appraiser.

Fannie mae would like you to use comparables that are both better and worse than your subject. This is not a USPAP requirement, but a secondary lender requirement. Typically they would like your value to be within the range of your unadjusted comparables sales prices and adjusted sales prices. They would also like you to bracket any features you have listed in the grid, so if your subject has a two car garage they would like to see other comparables with two car garages or at least bracket the subject's two car garage by showing a comparable with a one car garage and a comparable with a three car garage.

It is important to understand what your client wants and how to implement their request without violating USPAP. I suggest you check out the link provided by Mike Kennedy below and familiarize yourself with the secondary requirements of fannie mae. The majority of your work will be subject to these secondary requirements.

 

[EvalueMator]

[add to inferior and] [subtract from superior]

The best comparable sales can be defined as a reasonable number of comparable properties, within the subject market area, that "bracket" the most important value determining features of the subject. This bracketing allows the appraiser to add value to inferior property characteristics and subtract value from superior property characteristics in order to find a supportable estimation for the subject's market value.