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There Go My Brackets
From the Illinois Appraiser June 2016
Excerpt: Is it a USPAP violation to fail to bracket or end up with a tight bracket?
USPAP is silent on bracketing. For that matter, so is Illinois law. Here’s what Fannie Mae says;
“When there are no truly comparable sales for a particular property because of the uniqueness of the property or other conditions, the appraiser must select sales that represent the best indicators of value for the subject property and make adjustments to reflect the actions of typical purchasers in that market.”
Not a word about bracketing.
While comforting for an underwriter to see the collateral fall snugly into place, bracketing is still a guideline. This hasn’t stopped AMCs and lenders from complaining to the Board about missed brackets or huge ranges. There just isn’t a law against having a sloppy bracket, nor should there be.
Something else from Fannie Mae;
“It should be noted that the indicated value in the Sales Comparison Approach must be within the range of the adjusted sales price of the comparables that are reported in the appraisal report form.”
Read here for the full article:
Check out the other very interesting articles such as AMC fair housing Myths and Evaluations. Link to the original newsletter.
My comment: I have never “bracketed” anything except the value when I used to do appraisals for Fannie Mae loans. I have no idea why lenders are requiring bracketing for everything with an adjustment. Just another Stupid Scope Creep I guess. Works ok in conforming tracts with lots of sales and minimal adjustments, but goes downhill quickly after that. Of course, the entire appraisal review-by-computer assumes that all houses are in conforming tracts. As do the Fannie forms, of course.
Bracketing will set your mind free and point out your fantise
And a BIG AMEN!
Bracketing the un adjusted sales price, GLA, age,site, 2 comps with a similar foundation, 2 with the same style, 2 comps from the immediate neighborhood (if available) are all good ideas or some wise guy is going to shoot you down!
Be careful what you are bracketing. If u are bracketing the unadjusted sale prices u are violating USPAP as that implies a pre conceived value! As for bracketing adjustments – if u are choosing a sale simply because it allows u to bracket an adjustment while ignoring truly comparable properties then put it in there for your 8th comp. And don’t forget to charge extra for assignment conditions that are unnecessary. I recently had an appraisal where I made one adjustment to just 1 of 3 sales. And 1 adjustment to a listing. The spread from low to high was $3,000 after adjustment. The AMC wanted me include another sale that required an adjustment. Huh?
An opinion of value bracketed by the adjusted sales prices is the only bracketing that makes sense. Anything else is, at best, “nice to have”, but should never rise to the level of impugning the integrity or credibility of the report. Someone needs to set the industry straight on the ridiculous “rule set error” that flags an opinion of value for “not being bracketed by the unadjusted sales prices”! Some knucklehead decided to write the rule because they thought that if the adjusted sales prices should bracket, then gee, so should the unadjusted sales prices! The next thing you know, all of the lemmings (AMC’s) add it to their private “par” checker and that’s how we get this “rule creep” nonsense.
And let’s not forget my favorite chestnut: “The Opinion of Value Exceeds the Predominant Value. Please comment”. Again, the genius creators of the various rule sets apparently do not know that there is no such field on a report that indicates a “predominant value” and that there is a big difference between “price” and “value”! But it seems like once a new rule creeps into a rule set, it’s there forever. Oh well, this discussion could go on ad nauseum!
I agree with your 1st paragraph, and I am also tired of “imposed rules” that make no sense and only give the untrained “box-checkers” a job. But…..there IS a “field” in the forms where we include data that indicates a “predominate value”. It’s in the “neighborhood section under “One-Unit Housing”, page 1. Example;
PRICE AGE
$000 (YRS)
40 LOW 5
300 HIGH 75
150 PRED 25 <——- here 🙂
Therefore, I include a comment in the addenda to make them leave me alone. Such as;
"It is noted that the subject's appraised valuation falls below (or above, as the case may be) the predominant value for the neighborhood. The predominant value for the subject's neighborhood includes all homes and all sales, not only similar homes to the subject, or similar comparable sales to the subject. Page 1 of this report reports the predominant value for all homes in the subject's expanded neighborhood, which should not be considered misleading in an area of very diverse, newer and older homes combined with larger and smaller homes. The subject is not considered to be underimproved (or overimproved, as the case may be) for the neighborhood."
That has always worked. 😉
Bracketing is essential. When an across-the-board adjustment ranks all the comps superior or inferior, how did the appraiser determine the magnitude of the adjustment? At least one needs to rank equal or inferior, and that constitutes bracketing. if the appraiser wants his work product to be credible, which is a USPAP requirement, he or she should give serious thought to the importance of bracketing.
I don’t think anyone is saying they see no use for “bracketing” per se. I think the issue is reviewers working for AMCs / Lenders (and I use the term “reviewer” very loosely) making bracketing a REQUIREMENT to the point that they try to force the appraiser to include sales they would not use otherwise, just to “bracket” something. It results in worthless additional work for the appraiser and may not benefit the credible nature of the report at all. In fact, in could result in a misleading report.
And…it’s the fact that those completely untrained as professional appraisers, who are directly benefiting from a loan transaction, are believed to be in positions to dictate to appraisers how to do their unbiased job. 🙂 Can I hear an AMEN?
Another idiot MAI comment
Wayne you know that is not what I taught you back on 1985 when you started as my trainee.
“The fewer the adjustments required, the stronger the comps the better the appraisal.” and “Works ok in conforming tracts with lots of sales and minimal adjustments”.
Both of those comments are convincing only in subdivisions of like homes with few to no unique identifying characteristics, cookie cutters. Even then, are you adjusting for .75 bath as compared to 1 bath? No because you don’t have to? To ignore even the smallest significant details in favor of less comp adjustments and getting the report done quicker is not full disclosure, it’s just lazy. What you are saying in the report when using all 1.00 bath homes as comps is that the subject, a .75 bath home, is not an under-improvement when it is. And you are not measuring the market reaction to that under-improvement in your report. That clearly makes for a poor valuation.
When you have site characteristics in more suburban to rural areas, like say a large detached shop or garage, then you need to bracket that improvement or you are saying that the improvement is atypical and an over-improvement for the market area. Bracket it with a large barn or in-ground pool showing that over-improvement of the sites is typical in the market area. If you’re not bracketing you’re not competently doing your job and should consider sales instead.
There is no .75 bath unless your from the old days. I have not adjusted for a bathroom without a tub … I haven’t used the tub in 40 years.. If you have a shower it functions similar to a full bathroom..
Bracketing is good practice for the appraiser. If anyone questions your adjustments or comp selection, the bracketing speaks for itself. One is superior, one is inferior, and your result is in the middle, so therefore it’s reasonable. It’s hard to argue with that in my opinion.
The fewer the adjustments required, the stronger the comps, the better the appraisal. To artificially bracket is silly.
AMEN!!!
Amen to your amen.