*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+.3×98,000 = $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