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