New Reconcilation Comments

[HuntfishPA]

Looking for some help on the new reconciliation requirements. I have been certified residential for 16+ years with no problems with my work. In my opinion, there are so many factors that go into my final value estimate that, listing them all would be overwhelming if not impossible. I am looking to find out how my peers are handling this (any comments would be appreciated). I tried "because I said so" that did not fly.

 

[BRCJR]

What are the "new" requirements?

 

[RSW]

I make comments for the sales comparison analysis by itself. I start with the subject and describe it. I then talk about my search perimeters used to find comparable sales. I then comment on each sale in the order in the grid and explain my adjustments. I then reconcile why I used each sale. I then reconcile the entire sales comparison analysis. After than, I look to see if the cost approach if applicable or necessary to produce a credible appraisal report. If it is, I complete it. Same with the income approach. The final reconciliation describes what approaches I used and any other factors that may have been considered when arriving at a final value.

 

[TRESinc]

I make comments for the sales comparison analysis by itself. I start with the subject and describe it. I then talk about my search perimeters used to find comparable sales. I then comment on each sale in the order in the grid and explain my adjustments. I then reconcile why I used each sale. I then reconcile the entire sales comparison analysis. After than, I look to see if the cost approach if applicable or necessary to produce a credible appraisal report. If it is, I complete it. Same with the income approach. The final reconciliation describes what approaches I used and any other factors that may have been considered when arriving at a final value.

this. i can't tell you how many reports i've reviewed where the summary of the sale comparison is just a rehash of what the grid states without any summation at all (baths adjusted $X per fixture, GLA adjusted $Y per sqft, lots adjusted $Z per acre, etc - no kidding, i can read the grid too). amazingly every single report has the "best available comps" - no kidding? you mean you didn't pick the 4th, 5th and 8th most similar comps to use in your report?

same thing for the final recon., just a generic statement about "cost and income approaches are not applicable, sales comparison was used to determine price" with a few more fluff words thrown in.

 

[Deleted member 134708]

I suppose I can make a statement that lowest adjust sale = better indicator but I think it should be a known.

 

[HuntfishPA]

What are the "new" requirements?

My understanding is that they want similar comments to what RSW just replied, which would take a considerable amount of time. I am not lazy with my work, however, the more additional "requirements" I have, the less time I have to spend actually doing my job. I have done 3,000 appraisals? over the years and have had 2, maybe 3, complaints about my value (value disputes from owner), basically no problems as I am honest and competent (and humble ha ha). But now I spend so much extra time with additional BS, that this is one more headache that is difficult to put into a paragraph.

 

[Michigan CG]

The reconciliation of the SCA is supposed to state why the number picked is the number picked. Then the Final Reconciliation is supposed to tell us which approach is relied upon most or if there is a combination of approaches relied on then that needs to be explained. For the typical mortgage financing report one only relies on the SCA.

I have not read a decent reconciliation of the SCA in a very long time.

 

[hastalavista]

I make comments for the sales comparison analysis by itself. I start with the subject and describe it. I then talk about my search perimeters used to find comparable sales. I then comment on each sale in the order in the grid and explain my adjustments. I then reconcile why I used each sale. I then reconcile the entire sales comparison analysis. After than, I look to see if the cost approach if applicable or necessary to produce a credible appraisal report. If it is, I complete it. Same with the income approach. The final reconciliation describes what approaches I used and any other factors that may have been considered when arriving at a final value.

The above is good advice.

IMO, for residential work, most appraisal reports do the bulk of their reconciliation in the sales comparison approach. However, it may be that some clients are beginning to look for a more formal/traditional reconciliation of all approaches. Quality, quantity, strengths and weaknesses of the approaches are discussed in the traditional reconciliation section. The ideal reconciliation doesn't repeat what has already been described but rather synthesizes the approaches into one final value conclusion.

The sales comparison approach is used and relied upon within this assignment to conclude credible results. In this market, residential properties are purchased primarily for owner-user utility and the sales comparison approach best reflects this market motivation.
The overall quality of the data is very good. I have 3 recent sales that require no market condition adjustments and one of the sales is one parcel north of the subject on the same cul-de-sac street.
The weakness of this approach is the available listings to consider. The most applicable listing has had significant renovations ($2,000,000 per the broker). Despite this weakness, the 3 closed sales provide a high-confidence indicator of value. Furthermore, I've tested the adjustment scheme using sensitivity analysis which includes an outside-the-grid sale; the analysis indicates that the adjustment scheme, as applied, explains the value differences to within 4% for any one sale, and on average, to within 1%.

The cost approach is not necessary to conclude credible results; however, it is required by my client and I have therefore completed it. The cost approach is applicable for this assignment, as buyers of high-end custom homes do consider purchasing a site and building a new home within this market. The overall data for site value is above average: I have two prior sales of vacant sites within the subject's gated community, one of which has been relisted and is currently active. The additional sales outside of the development are generally in support of the concluded site value.
A weakness of this approach is the replacement-cost data; I've used a national costing service which relies on high-end Q3/Q2 blended $/sf; the subject's custom quality may not be adequately captured in this analysis. Despite this weakness, the cost approach's indicated value is within 2% of the indicated value by sales comparison approach. I gave the cost approach secondary consideration due to the relative inferior quality of the data vs. the sales comparison approach.

The income approach is not necessary to conclude credible results and is not required by my client. The typical buyer and seller in this market is an owner-occupant and income revenue is not a significant market-participant motivation. Therefore, the income approach is not completed.

My reports generally follow the same format; you could say it is a template but it isn't boilerplate because it is customized for each assignment.

To the OP: I do not think this is BS.

 

[Michigander]

Nothing new about reconciliation. Report should lead the client and any intended users to a logical conclusion. Take what you put together and paint a picture of the conclusion. Here is an example:

Reconciliation within the sales comparison approach

I have included four closed sales within the immediate neighborhood, two that are inferior to the subject (sales 1 and 3) and one that is generally equal but just slightly inferior (sale 2) and one sale that is superior to the subject (sale 4). Without regard to any adjustment other than small adjustments for changing market conditions on sales 3 and 4, the inferior properties point to sales prices of $525,000 and $565,575 respectively, indicating that the subject value should be greater than $565,000. The superior property sold for $620,000, adjusted only for changing market conditions. The one sale that was most similar sold for $580,000 but it remains slightly inferior.

Logically, the subject value should be greater than $565,000 and lower than $620,000 without regard for any adjustment other than market, and it should fall closest, but slightly above, $580,000 based on this analysis of the unadjusted range.

After making adjustments for the elements of comparison that I deem most important, namely location within the subdivision, market conditions, size, basement finish and overall updating, the sales price ranges narrow significantly from a low of $588,000 to a high of $595,000. As three of the sales adjust in a narrow range around $595,000 and the market appears to be on verging on an upswing again, I am concluding to the higher end of my adjusted sales price range at $595,000. Note that the unadjusted range is greater still and brackets both on the lower and higher ends and I consider this a well-supported analysis.

Point of clarification on where adjustment are derived – they are through the use of grouped paired analysis related to the basement finish, as well as the trends data above, and depreciated cost on gross living area. All are downgraded somewhat as the sales are then compared to each other, and although the market shows a greater increase in price over time than what is used, the two recent sales give a good indicator of where the older sales should be, and the basement finish of the three comparables with finish, helps set an indicator of value for the one sale without

 

[Zero]

My understanding is that they want similar comments to what RSW just replied, which would take a considerable amount of time. I am not lazy with my work, however, the more additional "requirements" I have, the less time I have to spend actually doing my job. I have done 3,000 appraisals? over the years and have had 2, maybe 3, complaints about my value (value disputes from owner), basically no problems as I am honest and competent (and humble ha ha). But now I spend so much extra time with additional BS, that this is one more headache that is difficult to put into a paragraph.

If you cannot adequately summarize your opinion with a coherent reconciliation, you cannot claim to be "doing my job" because that IS your job. Any primate can slap comps on a grid, real appraisers provide logical summary of their conclusions...which is called reconciliation.