1. Reconciling the Value Estimates Basic Real Estate Appraisal: Principles & Procedures – 9 th Edition © 2015 OnCourse Learning Chapter 15

2. STUDENT LEARNING OUTCOMES Define the term Reconciliation Explain why one must first Review each Value Approach that has been used Explain why one Reviews the Data Used in Each Approach Show how to Round the Final Value Conclusion 2 Page 494 © 2015 OnCourse Learning

3. 15.1 GENERAL REVIEW OF THE APPRAISAL Divided into Two Basic Steps.. Review the Overall Appraisal Process Review for Technical Accuracy 3 Page 495 © 2015 OnCourse Learning

4. REVIEWING THE APPRAISAL PROCESS Reconsider the overall assignment; have you..? (1)Precisely located and identified the property? (2)Clearly defined the property rights? (3)Pinpointed the date when the value estimate applies? (4)Given a formal definition of the type of value stated? (5)Clearly defined the intended use and user(s) of the appraisal and report? 4 Page 495 © 2015 OnCourse Learning

5. REVIEWING THE DATA COLLECTED Have you considered…. (1) The Type of Property being Appraised? (2) The agreed Scope of Work? (3) The Intended User(s) of the Appraisal?...based on the foregoing, which approach or approaches may be most relevant? 5 Page 495 © 2015 OnCourse Learning

6. TECHNICAL REVIEW All calculations should be checked for accuracy; as well as all measurements All data should be checked for completeness and accuracy The appraiser should check for consistency (H&B Use, Age, Market Conditions, etc…) Reconsider any assumptions made during the appraisal; are they appropriate? 6 Page 495 © 2015 OnCourse Learning

7. 15.2 RECONCILING THE VALUE APPROACHES Reconciliation is defined as: The process of reducing a range of valuation indications into an appropriate conclusion for that analysis 7 Page 496 © 2015 OnCourse Learning

8. HOW APPROPRIATE IS THE APPROACH? How Accurate & Relevant is Each Approach? Validity and Relevance depends on the Intended Use The Type of Property plays a role in which value approach is used What is demonstrated by the actions of buyers and sellers in the market? Consider the characteristics of each approach; their strengths and weaknesses 8 Page 497 © 2015 OnCourse Learning

9. EVALUATING THE DATA Consider the Relevance, Reliability and Adequacy of the Data Used Is Data Reliable Enough (Quality)? Sufficient Quantity of Data? Consider the Assumptions or Judgments in the processing of data for each approach The Approach deemed the most reliable and relevant, and as supported by the data, should be given the most weight 9 Page 497 © 2015 OnCourse Learning

10. THE VALUE RANGE What does each Value Indicator tell you about the respective approaches? Which appears High or Low, and Why? Clustering of two of the approaches at one end of the range may suggest that the final value should be concluded at that part of the value range 10 Page 498 © 2015 OnCourse Learning

11. REVIEW THEORY OF THE APPROACHES 11 Page 499 © 2015 OnCourse Learning

12. REACHING A FINAL VALUE ESTIMATE Never An Average (but it could argued to be a Weighted Average) Emphasize Strengths & Weaknesses of the Approaches and/or Data Arriving at and Explaining Your Conclusion can be the one of the Most Difficult Steps in the Appraisal Process Exercise Judgment!! 12 Page 500 © 2015 OnCourse Learning

13. RECONCILIATION SECTION OF URAR 13 Page 502 © 2015 OnCourse Learning

14. 15.3 ROUNDING THE CONCLUSION Rounding the Conclusion is the last step in the Reconciliation Consider the number of Significant Digits in the market data collected and methodology Relate it to the Typical Market Prices for the Sales and Listings of Comparable Properties Reconcile within the Range of Value Indicators, or at the High or Low End (never outside of the range) 14 Page 502 © 2015 OnCourse Learning

15. CHAPTER SUMMARY After a value indication has been reached for each of the relevant approaches, the appraiser usually must then reduce these separate value indications to a single estimate. This process is called reconciliation. It requires (1) a review of the overall appraisal process; and (2) a review for technical accuracy. 15 Page 504 © 2015 OnCourse Learning

16. CHAPTER SUMMARY At the end of this process, a final value conclusion is normally reached. Arriving at a final conclusion involves many considerations, but in the end it is the result of the appraiser exercising judgment. Once your conclusion has been reached, you will then want to consider rounding your answer. 16 Page 504 © 2015 OnCourse Learning

17. IMPORTANT TERMS & CONCEPTS Consistency Range of Values Reconciliation Rounding Significant Digits 17 Page 505 © 2015 OnCourse Learning