Reconciliation
The process by which an appraiser evaluates and weighs the results from the different valuation approaches (sales comparison, cost, and income) to arrive at a final opinion of value.
Reconciliation is not simply averaging the values from different approaches. The appraiser considers the reliability and applicability of each approach given the property type, available data quality, and the purpose of the appraisal. For a typical single-family home, the sales comparison approach usually receives the most weight because it directly reflects market behavior. The cost approach may be given more weight for newer properties, while the income approach is weighted more heavily for investment properties. The appraiser must explain the reasoning behind the weighting in the report.
Related Terms
Sales Comparison Approach
A valuation method that estimates a property's value by comparing it to similar properties that have recently sold in the same market area.
Cost Approach
A valuation method that estimates value by calculating the cost to reproduce or replace the improvements, subtracting accrued depreciation, and adding the land value.
Income Approach
A valuation method that estimates a property's value based on the income it generates or is expected to generate.
Market Value
The most probable price that a property should bring in a competitive and open market under all conditions requisite to a fair sale, with the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus..
Final Opinion of Value
The appraiser's concluded estimate of the defined value of the subject property as of the effective date, arrived at after analyzing all relevant data and reconciling the results of the applied valuation approaches..
More in Valuation Approaches
View allComparable Sale
A recently sold property that is similar to the subject property in terms of location, size, condition, and features, used as evidence to support the appraiser's opinion of value in the sales comparison approach..
Adjustment
A dollar or percentage modification applied to a comparable sale's price to account for differences between the comparable and the subject property.
Paired Sales Analysis
A technique used to estimate the value contribution of a specific property feature by comparing two sales that are identical except for that one feature.
Bracketing
The practice of selecting comparable sales that are both superior and inferior to the subject property in key features, so that the subject's indicated value falls within the range of adjusted comparable values..