Chapter 5:  Reconciliation, Value Conclusions, and Appraisal Reports


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

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

u  Weighted averages

u  Determination of the weights

u  Bayesian (educated guessing)

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

Reconciliation Example

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

u   Straight Average

u   Weighted Average
20%  New, 50%  Rentals,  30%  Resales
.2*$120,000+.5*$105,000+.3*98,000 = $105,900


u   Beware of Significant figures problem

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

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

u   Round to market expected numbers.

Range of Value and Probability Distributions

u   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.

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

Appraisal Reports

u   Oral

u   Letter

u   Form

u   Narrative

u   Demonstration