Summary Of Sales Comparison Approach & Reconciliation

[Mike Kennedy]

To me the proper place to reconcile the SALES is in Sales approach. The reconciliation section should explain what approach is weighted and why. If an approach is not used, the reconciliation is where I explain if an approach was applied, or was not applicable. That latter item is easy to stumble over. The cost approach is usually applicable but not necessary. The income approach is often applicable but not necessary but I see appraisers usually claim it is "not applicable" and too often hand in hand is a statement or check box saying 10% or less of the neighborhood is rental property, when a manual survey or even census records suggest 30% or more. Here only new subdivisions are commonly 10% or less rentals.

Understanding the difference between "not applicable" & "not applied" is the difference between lightning and lightning bug (apple polly loggies to Twain)

"To me the proper place to reconcile the SALES is in Sales approach.." Absolutely correct.

 

[ucbruin]

In for a dime, in for a dollar.

I only used the SCA for the assignment I posted. Here is my final reconciliation which explains why the SCA is so relaible (in my opinion) and why I didn't feel the need to include the Cost or Income Approach.
Note that I don't say the Cost Approach "isn't applicable" (it is always applicable when the assignment is market value and there are land + improvements to value); the biggest reason not to use it is because the data is so superior in the SCA that the cost approach isn't necessary. My subject's buyer-type is an owner-user; therefore, the income approach isn't necessary (again, IMO).

RECONCILIATION COMMENTS

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. There is a model-match that just closed on the same street with a pool. Furthermore, I have another cul-de-sac sale from within the immediate neighborhood as well as competitive sales from the overall competitive market. I was able to confirm the terms/conditions of the sales with at least one agent/broker related to the transaction.
I did not consider this data set to have any significant weaknesses. It provides a very reliable indication of value for this assignment.

The cost approach is not necessary to conclude credible results and is not required by my client. The typical buyer in this market does not consider the alternative of developing a site him/herself vs. purchasing home already built. As noted in the H&BU analysis, it is not financially feasible to develop a vacant site at this time; the lack of feasibility further weakens this approach's reliability. And, last but not least, the data available for the use in the sales comparison approach is so superior that the cost approach would be given little if any consideration, and only in a supporting role. Therefore, the cost approach is not completed.

The income approach is not necessary to conclude credible results and is not required by my client. The subject has been updated and is well maintained; as noted in the H&BU analysis, the typical buyer for this property is an owner-user; owner-users rely on the sales comparison approach as their primary means for evaluating a purchase: income revenue is not a significant owner-user motivation. Therefore, the income approach is not completed.
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But, I say again: The entire reason for explaining oneself in the report is so the client/intended user can understand where you are coming from and why you did what you did.
They can always disagree (I'm fine with that as an appraiser). But what I don't want to hear from a client is, "Denis, we don't understand why you did what you did??". If they say that, I've failed to properly communicate my analysis.

(and, you can see one doesn't have to write War & Peace. A short paragraph for each approach should do the trick on most residential assignments).

Denis,

I think your reconciliation is great!!!!! (as is Don Clark's)...

Would this be considered "boiler plate" for 90% of your "cookie-cutter" residential assignments?

And the only reason I ask is because the comments are soooo good, that they probably apply, without any changes, to a high percentage of assignments.

And also because you have much credibility that even those who may not like "boiler plate" would have to admit that there is a place for "good" boiler plate language.

 

[ucbruin]

RECONCILIATION OF VALUE: The unadjusted sales prices range from $44,000 to $73,000 ($60.19/SF to $95.05/SF). Sales #1, #4 and #5 are in similar condition to the subject; sale #3 was in poor condition when it sold. Sales #2 and #5 were REO properties at the time of sale. Sale #6 is the resale of comparable #2 after it was rehabilitated and I was not able to confirm the sale with anything other than assessor records.


The adjusted sales prices range from $58,000 to $66,450 (not including sale #6 which is given little consideration). While the subject property has a ¼-acre site it is odd in shape which is a detriment. The home has older cabinets in the kitchen and bathroom.


Given the property needs to be completed (door, window and floor trim and the wood flooring) I have reconciled the value of the property at $60,000. It is my opinion that the subject property value as of October 15, 2016 is at or near $60,000 which is $86.21/SF in the property’s AS-IS condition.

Man, I really want to critique this post....

 

[Tom D]

the appraisal form was invented to make reading an appraisal easier for normal people. i see the narrative appraisal slowly returning. however, as a long time "appraiser", even i'm phasing out on some of your wordy analysis. i don't think the normal person can understand the fine print of our reports. i'm a minimalist, any other profession going into such detail over their repairs, or conclusions. and please uspapers, i know i should be hanging, neck broken, from a USPAP tree limb. you know, a life choice job should have some part of it that is fun. not anymore.

 

[Terrel L. Shields]

the appraisal form was invented to make reading an appraisal easier for normal people.

Now its purpose is to let a computer parse buzzwords while obfuscating the report contents. When the 3 reporting options were modified it basically made "summary" obsolete. The form report has functionally been rendered into a self-contained report written in Globish (google it if you don't know) and vetted by computer with the certitude that additional remarks will be required post-report.

 

[hastalavista]

Denis,

I think your reconciliation is great!!!!! (as is Don Clark's)...

Would this be considered "boiler plate" for 90% of your "cookie-cutter" residential assignments?

And the only reason I ask is because the comments are soooo good, that they probably apply, without any changes, to a high percentage of assignments.

And also because you have much credibility that even those who may not like "boiler plate" would have to admit that there is a place for "good" boiler plate language.

UC, as you know, I pm'd you with my reply but thought it only fair to publicly state it (rather than leaving it to you).

Yes, I use a template and the reconciliation example I posted follows that template.
I make a differentiation between "boilerplate" and "template" as follows:

• I consider a "template to be framework; it sets the overall format of what I'm going to put into that section (data, analysis, rationale) but by itself would not make sense and would not be relevant to the assignment. Only once the template is customized with the subject-specific data, analysis, and rationale does it become relevant and subject-specific. If you look at a collection of my reports, you'll see a familiar formatting (thanks to the templates) but the sections are relevant and subject-specific.
• I consider a "boilerplate" to be somewhat of a standard comment that rarely gets changed. Definitions would be a perfect example. The comments about intended user and who can rely on the report (that Fannie Mae put out a few years ago) would be another. These types of comments are not subject-specific and do make some kind of sense on a stand-alone basis. I have boilerplate comments in my report as well, but they are limited, and some are only put in as an affirmative action on my part (I have to insert them into my report) vs. as being part of the default of the report (they are already in the report). I try to be careful with the boilerplate because of the danger (as I see it) of including it when it isn't relevant or, even worse, when it could contradict something that is relevant.

I don't know if I have anymore or less credibility than anyone else on this matter; but I believe that there is a useful place for template-framework and boilerplate statements in residential real estate appraisal reports. The trick is to keep them relevant and to a minimum, don't let them become the default, and make sure they are current and consistent with the assignment-specific data, analysis, and rationale in the report.

With that, I wish you and others good luck.

 

[bnmappraisal]

but I believe that there is a useful place for template-framework and boilerplate statements in residential real estate appraisal reports. The trick is to keep them relevant and to a minimum, don't let them become the default, and make sure they are current and consistent with the assignment-specific data, analysis, and rationale in the report.

Well said, Denis! I agree with your use of template and boilerplate. I have both in my standard 1004 as well, although I agree, the template side should WAY outweigh the boilerplate. Sadly, often times when doing review or glancing at another appraisal at the homeowner/borrower's request, I see way too many boilerplate comments outweighing any actual/meaningful analysis.

I don't pretend to be "Mr Appraiser" by any means, but do believe my reports to be credible to the intended user (don't we all think that?!) and take pride (and the time) to amend my template(s) to each report

 

[ucbruin]

UC, as you know, I pm'd you with my reply but thought it only fair to publicly state it (rather than leaving it to you).

Yes, I use a template and the reconciliation example I posted follows that template.
I make a differentiation between "boilerplate" and "template" as follows:

• I consider a "template to be framework; it sets the overall format of what I'm going to put into that section (data, analysis, rationale) but by itself would not make sense and would not be relevant to the assignment. Only once the template is customized with the subject-specific data, analysis, and rationale does it become relevant and subject-specific. If you look at a collection of my reports, you'll see a familiar formatting (thanks to the templates) but the sections are relevant and subject-specific.
• I consider a "boilerplate" to be somewhat of a standard comment that rarely gets changed. Definitions would be a perfect example. The comments about intended user and who can rely on the report (that Fannie Mae put out a few years ago) would be another. These types of comments are not subject-specific and do make some kind of sense on a stand-alone basis. I have boilerplate comments in my report as well, but they are limited, and some are only put in as an affirmative action on my part (I have to insert them into my report) vs. as being part of the default of the report (they are already in the report). I try to be careful with the boilerplate because of the danger (as I see it) of including it when it isn't relevant or, even worse, when it could contradict something that is relevant.

I don't know if I have anymore or less credibility than anyone else on this matter; but I believe that there is a useful place for template-framework and boilerplate statements in residential real estate appraisal reports. The trick is to keep them relevant and to a minimum, don't let them become the default, and make sure they are current and consistent with the assignment-specific data, analysis, and rationale in the report.

With that, I wish you and others good luck.

Denis,

If you didn't post this message I wouldn't have realized that I had a private message!!!

Your response, to my question regarding your excellent template, is also excellent.