In the appraisal report that you conducted for me, you mentioned bracketing. What is meant by this term?

Bracketing is the main criteria utilized by top appraisers in the selection of comparable sales that are used within the adjustment grid. This refers to selecting sales that are considered better, similar and worse than the subject property in a comparative element. For examle, if the subject is in average condition, we locate sales that are in inferior, comparable and superior condition to the subject property. By doing this, we are able to more accurately determine and support the adjustment applied within the sales comparison grid. Although we may not always be successful in selecting sales that accomplish this goal, we make every attempt to find sales that will bracket the subject property.

Although three sales may have happened beside the subject property, we may elect only to utilize one or two of these as they may not create bracketing. A great example is examining a new house in a subdivision that includes homes up to ten years of age. We find three sales of the same house, however, all three are over five years of age. By using only these three sales, we can not accurately determine what adjustment is applicable for the variance in condition and effective age. Therefore, we will include another one or two sales from other similar subdivisions that have sales of new homes. By doing this, we have bracketed the subject property in condition and will be able to support the adjustments that are applied.

In the appraisal of real estate bracketing is absolutely essential. Without it, adjustments can not be supported and value conclusions can not be relied upon by end users.

Submitted By:Tom M.
Answered By:John Good, MAI

Why doesn't Good Valuation reduce their appraisal fees when loans do not close?

There are two reasons why we can not reduce our appraisal fees when a loan does not close. First, and most importantly, it is a violation of the Uniform Standards of Professional Appraisal Practice. Reducing the fee would be considered a violation under the Management section of the Ethics Rule and would be cause for a suspension of an appraiser's license.

According to USPAP, it is unethical for an appraiser to accept an assignment, or to have a compensation arrangement for an assignment, that is contingent on any of the following: 1. the reporting of a predetermined result (eg. opinion of value) 2. a direction in assignment results that favors the cause of the client; 3. the amount of a value opinion; 4. the attainment of a stipulated result, or; 5. the occurrence of a subsequent event directly related to the appraiser's opinions and specific to the assignment's purpose.

The second reason, which strikes a little closer to home, is we have costs involved in the preparation of the report. In the highly competitive market for residential appraisers, the prices that are charged are market derived and do not include a large profit margin. By us reducing the fee due to the loan not closing, it would actually cost us to provide the appraisal report.

Submitted By:W.K.
Answered By:John Good, MAI
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