How do Real Estate Appraisers in Baton Rouge reconcile a home’s value with a set of comparables?
My Appraiser friend and colleague, Tom Horn SRA of BirminghamAppraisalBlog.com, recently penned “How appraisers reconcile value“. In this article, Tom explains What is an appraisal reconciliation, understanding the temperature of a housing market, condition of the home, quality of construction as it relates to other homes in the neighborhood, supply of homes on the market and is there a lack of supply forcing home prices higher?
For What is an appraisal reconciliation?, Tom states, “When appraisers reconcile value they look at several different criteria to determine where within the range their final opinion of value will fall. Keep in mind that we refer to the appraised value as our “opinion of value”. Even though it is our opinion, it is based on market data, experience, education, and knowledge of the area. This is why three different appraisers may come up with three different values. With that being said those values should be relatively close. So let’s take a look at the different criteria considered when appraisers reconcile value.”
To visually help understand what reconciliation is based on a set of comparable sales being used, I offer these two visuals.
In this image below, the black arrows indicate the adjusted sales prices of the 3 comps or comparable sales being used and there could be up to 6 or 9 comps being used within this report. The adjusted sales prices range $526,400, $522,800 and $553,000. What’s striking to me is Comp 1 has a net adjustment of almost 24% and 34% gross adjustment, which is above Fannie Mae’s 15% guideline. Comps 2 & 3 have lower adjustment percentages for both net and gross. Therefore, comps 2 and 3 would be considered better indicators of value because they have lower percent adjustments.
Reconciliation via a weighed average approach. In this example, I carefully drove by each comparable property taking photos, read all MLS listing comments and viewed all listing photos to best understand of of these nine comparables. Driving by each comparable offers the best understanding of neighborhood dynamics in play for each comparable. Based on my knowledge of each comparable to that point, I assignment a percentage of weight for each comparable. For example, comps 4-6 were actually the 3 best comps based on similar location, although they sold in 12/2015, and were weighed at 20% each. Comps 7 and 9 were only weighed at 5% each because they’re located in a newer development with higher overall predominant values than subject home or subject’s immediate neighborhood.
If you have further questions about Baton Rouge Home Appraisals, contact Bill Cobb Appraiser at asktheappraiser at g mail dot com.
About Bill Cobb, Baton Rouge Home Appraiser
This Baton Rouge Home Appraisal Website is an information source provided by local Home Appraiser, Bill Cobb, and Accurate Valuations Group LLC. Bill has over 24 years experience as a Residential Appraiser and updates his local network of site network with reports, videos and audio reviews of local housing market conditions!