Opinions...

[Bill_FL]

Having a debate, looking for input.


You have completed all 3 approaches to value, and are in the final reconciliation phase. Are your three values opinions of values by the various approaches or are they indicators of value and the only opinion of value is the final opinion.

My take is that all 3 are opinions of value. If we take, say the sales comparison approach, an indicator of value might be the adjusted sales prices of your comparable sales. Once you reconcile those, you have developed an opinion of value.

I know this may seem like semantics, but I am just curious as to your take on it. I have a guy taking me to task saying there is only one opinion, the rest are indicators.

 

[Walter Kirk]

I don't see how thay can be anything but indicators. A cost approach could be considered an opinion of value since it reflects the real cost of the subject however if the market isn't willing to pay that amount or it's ability to generate income won't support that amount it can't be anything but an indicator.

 

[Restrain]

The "opinion of market value" is the final estimate of value that you set forth and certify to. If you utilize all three approaches to value, each gives an estimate of value by that approach. Each approach may yield a valid indicator of value, but one approach is usually given more weight due to the data available and viability of the approach.

For example, an old home. The Cost Approach can be used, but due to the changes in building styles, materials, and demand from the market, has limited reliablity. The Income Approach may be appropriate, but it may not account fully for functionality issues, etc, and the data may be limited. The Sales Comparison Approach has several older home sales that can be utilized to reach a reasonable estimate of value.

All three approaches have been utilized, and it is up to the appraiser to make a final decision as to which approach is most appropriate and provides the most reasonable estimate of value.

That being said, nowhere does it say that one of the values is to be the final opinion of value. Given the data and reliability of analyses, it may fall within the range of the three indicators of value.

 

[Proactive]

I agree that it may be semantics... I consider my final value conclusion to be the "opinion of value". The approaches used provide "indicators of value" that are reconciled to arrive at the "one and only" opinion.

That's my take...

 

[Pamela Biggers]

The market approach (if done correctly) is baised on factual data. The income approach (if done correctly) is baised on factual data. The cost approach (if done correctly) is baised on factual data.

Your opinion is the end result of reconciling these approaches and taking everything into consideration within the scope of the assignment. This is how it should be in the perfect world.

However, since most appraisers "guess" and/or put "their spin" on each approach. I guess you could argue that it is all an opinion.

 

[Hal Mann]

Personally, I have always used the term "indication" to describe the product of an individual approach. I'm not sure it makes sense to apply the term "opinion" to these indications. Often they aren't my opinion of value, so why call them that? I find it somewhat misleading to refer to each of the various indications as an opinion of value.

 

[Webbed Feet]

Mr Potts,

Afraid to tell you I am with the others so far. The appraiser's "Opinion of Value" is developed and stated in the reconciliation phase. Prior to that everything is indicators used based on their strengths and weaknesses to support that reconcilation.

I understand your "appraisals within an appraisal" concept you are coming from. In a way we have multiple reconciliations possible culminating in one final reconcilation. This is like picking the "best" answer in a multiple choice test when more than one answer could be considered correct. I would have to go with what are the requirements per the Scope of Work? Indicators or each an appraisal unto itself? I feel it has to be viewed that it is the final reconciliation that counts the most.

Barry Dayton

 

[incognito]

I'm thinking that the way to approach this is by starting with the Scope of the Appraisal. In your scope, you should establish which APPROACHES to value will be used, and why. You should then discuss that each APPROACH will result in a value indication. Then, in your final reconciliation, you should RECONCILE the APPLICABLE indications of value, to an OPINION of Market value.

I like to look at an appraisal as a story. Introduction=Scope. Body=narrative and valuation sections of report. Conclusion=Reconciliation.

 

[DB]

I use the term "indication" for all approaches and then reconcile the approaches into my value "opinion".

 

[Bill_FL]

So none of you reconcile the data from the individual approaches? You just use some kind of math function?

If you develop a cost estimate of the improvements, a land value by sales (and you do not reconcile them, you just use some kind of weighted averaging) then you develop a value for the depreciated value of the site improvements and just sum them? Whatever it is, it is? You do not reconcile those to one final opinion of value, by that approach?

Same with the sales comparison approach. You adjust the sales prices and use a mathematical formula to arrive at a value by that approach?Or do you reconcile the adjusted sales and form an opinion of value by the sales comparison approach?