Chapter 5: Reconciliation, Value Conclusions, and Appraisal Reports

Reconciliation

* Used throughout the appraisal process anytime the appraiser must reduce multiple indications into a single estimate.

* Final reconciliation involves reconciling the difference among the specific valuation techniques that were chosen for the appraisal.

* Weighted averages

* Determination of the weights

* Bayesian (educated guessing)

* Market driven based upon the percentage of newly constructed properties and the percentage of rentals.

Reconciliation Example

* Cost-Depreciation Value=$120,000
Income Approach Value=$105,000
Sales-Comparison Value=$98,000

* Straight Average
($120,000+$105,000+$98,000)/3=$107,667

* Weighted Average
20% New, 50% Rentals, 30% Resales
.2$120,000+.5$105,000+.398,000 = $105,900

Rounding

* Beware of Significant figures problem

* $34.35/sq.ft. * 988,363 sq.ft =$33,950,269.05

* However, this must be rounded to $33,950,000 because the maximum number of significant figures is four.

* Round to market expected numbers.

Range of Value and Probability Distributions

* Range may be more useful to client than a point estimate especially when appraising for a seller who wants to know what price the property should sell.

* Distribution is helpful when sufficient data is available. Especially useful when multi-modal distributions are present.

Appraisal Reports

* Oral

* Letter

* Form

* Narrative