USPAP Standard Rule 2-1

[Terrel L. Shields]

The one sale most similar, might be the outlier...so? Why would you tie yourself to a process of mandatory selection based upon "the best" comp? Again, if you are only going to consider one sale as valid proof of value, you only need ONE sale. Again, you are arguing (apparently) that it somehow violates USPAP and is "misleading" to weight all sales equally, or to weight two sales as equals. Why? What textbook teaches that? Where is that in USPAP? Well, short answer it isn't. In fact, ranking sales is a method of comparison that allows the appraiser to select through several sales to arrive at a value. But it doesn't mean they have to select one sale. They could average the whole mess, or they could weight it between two sales.

I am working on a poultry farm. 3 houses are 43' x 500' which was the standard size 10 years ago. The newer houses are 55' x 600'. My comps consist of one with all 43' x 500'; one with only 55' x 600' and yet a third with 2 even older 40' x 400' and three 55' x 500'. The incomes are similar. One has 40 acres, the others nearly the same size as the subject. The subject has a dwelling superior to any comparable- perhaps the biggest newest dwelling I've appraised on a farm in a long time. All sold between $1,300,000 and $2,025,000... pick "one" that is superior to the others. I can't. They all have similarities and differences and adjust in a pretty tight range. In fact, I am likely to look at the income and cost approaches to see what makes the most sense...and in the end, the income approach is likely to be weighted in the final reconciliation. I will have reconciled the sales in that approach...and, pray tell how Std 2-1 is involved in the first place.

 

[hastalavista]

Not describing it is what I say is misleading

Sorry for the repaeat I loss the first comment

Ok; I understood you correctly the first time.

No, I don't think it is misleading if that is how the appraiser concluded his/her value conclusion.
At best, it is deficient and failed to adequately "summarize...the reasoning that supports the analyses, opinions, and conclusions..."
And, that is in the context of the client and intended users:


As I said, I wouldn't do it and wouldn't advise just referring to "weighted average" because it implies a rote calculation rather than a reasoned consideration.

But, if I were the client and intended user, and an appraiser did an appraisal for me, and I know what "weighted average" is and how it works, and that is what the appraiser cited, then when I look at the report and I see that the value conclusion is reasonable and credible when that method is applied, how am I misled? I'm not.
And even if I disagree with the value based on that methodology, since I understand how it works, I'm still not misled: I know exactly what the appraiser intended and what the appraiser did.

You asked for opinions, didn't you? I've not only stated mine but gave you my rationale to support that opinion (kinda like what one is supposed to do in an appraisal).

 

[Mr Rex]

Mr Rex

Can you abound a little more? Do you refer to my previous post? or to appraisers that use the weighted average and range of values and a value within this range without explaining it?

Alot better than basing all weight on one comparable. I don't think you can or have explained your use of one comp @ 100% weigting.

 

[App601]

Ok; I understood you correctly the first time.

No, I don't think it is misleading if that is how the appraiser concluded his/her value conclusion.
At best, it is deficient and failed to adequately "summarize...the reasoning that supports the analyses, opinions, and conclusions..."
And, that is in the context of the client and intended users:
View attachment 32654

As I said, I wouldn't do it and wouldn't advise just referring to "weighted average" because it implies a rote calculation rather than a reasoned consideration.

But, if I were the client and intended user, and an appraiser did an appraisal for me, and I know what "weighted average" is and how it works, and that is what the appraiser cited, then when I look at the report and I see that the value conclusion is reasonable and credible when that method is applied, how am I misled? I'm not.
And even if I disagree with the value based on that methodology, since I understand how it works, I'm still not misled: I know exactly what the appraiser intended and what the appraiser did.

You asked for opinions, didn't you? I've not only stated mine but gave you my rationale to support that opinion (kinda like what one is supposed to do in an appraisal).

How about if the intended user does not know anything about weighted average and he is expecting a higher value and the appraiser used the weighted average and said for example "The adjusted values have a range from $120k to $160K and the opinion of value is $140k by the weighted average" Would it be better to explain the methodology of arriving at the $140k ? Like saying how much weight you gave to each comparable sale?

 

[hastalavista]

How about if the intended user does not know anything about weighted average and he is expecting a higher value and the appraiser used the weighted average and said for example "The adjusted values have a range from $120k to $160K and the opinion of value is $140k by the weighted average" Would it be better to explain the methodology of arriving at the $140k ? Like saying how much weight you gave to each comparable sale?

(my bold)

Of course it would.
I'm not sure what your point is now?
You want to talk about best practices, I agree (didn't I say I wouldn't do what the appraiser in your example did nor would I recommend it?).
You want to talk about misleading, I disagree.

 

[App601]

Alot better than basing all weight on one comparable. I don't think you can or have explained your use of one comp @ 100% weigting.

When I took my first appraisal course I thought that the opinion of value was an average of the comparable sales. I am an engineer and love working with numbers

The professor said that it was the MOST SIMILAR comparable So if you selected the best comparable sales you are establishing the opinion of value based on ONE of the three adjusted values. However, the other 2 adjusted values should provide support to the opinion given

I normally try to use bracketing in the comparable sales selected and therefore chose the mid value if it is the best adjusted value indicator. However not all times it works like that and I am no afraid of using the lowest or the highest adjusted value as my opinion whichever is the most reliable

 

[App601]

(my bold)

Of course it would.
I'm not sure what your point is now?
You want to talk about best practices, I agree (didn't I say I wouldn't do what the appraiser in your example did nor would I recommend it?).
You want to talk about misleading, I disagree.

Thanks for your opinion. I consulted today with an employee ( RE Appraiser) of one of my clients and agrees with you that it is not misleading. He revises appraisal reports but is not an underwriter That was precisely the question that I wanted to be answered. If it is misleading or not However, He recommended that should avoid the weighed average unless there is no other "credible" way of reaching an opinion of value

Take care

 

[hastalavista]

Thanks for your opinion. I consulted today with an employee ( RE Appraiser) of one of my clients and agrees with you that it is not misleading. He revises appraisal reports but is not an underwriter That was precisely the question that I wanted to be answered. If it is misleading or not However, He recommended that should avoid the weighed average unless there is no other "credible" way of reaching an opinion of value

All's well that ends well!

 

[Mr Rex]

When I took my first appraisal course I thought that the opinion of value was an average of the comparable sales. I am an engineer and love working with numbers

The professor said that it was the MOST SIMILAR comparable So if you selected the best comparable sales you are establishing the opinion of value based on ONE of the three adjusted values. However, the other 2 adjusted values should provide support to the opinion given

I normally try to use bracketing in the comparable sales selected and therefore chose the mid value if it is the best adjusted value indicator. However not all times it works like that and I am no afraid of using the lowest or the highest adjusted value as my opinion whichever is the most reliable

Have you ever considered that your "professor" is a moron?

 

[Terrel L. Shields]

The only advantage of hanging your hat on one sale, is you only have to defend one sale...

Have you ever considered that your "professor" is a moron?

I didn't want to say that...but then I recall back in the early 90s when the info you got was often piffle created in the fertile minds of old guys who had appraised long before formal USPAP even existed and not all were MAIs...Remember NAMA? NAREA? etc.