In some craftsman-built period homes in older cities, you may have a market-recognized difference in "craftsmanship" (materials, cornice work, staircases, trim, etc.) that appears to be an age adjustment, when in fact a quality adjustment may be needed.

Above Grade Room Count & Gross Living Area

Avoid duplicate adjustments in this area. If you adjusted for an additional bedroom in one of the comparables and you also adjust for a difference in living area, have you adjusted for the dissimilarity twice? This also applies to a lack of a second bath. Make sure that you don't duplicate that deduction in the "functional utility" area.

Energy Efficient Items

Many homes include a variety of energy efficient features such as standard dual-pane windows, Low-E windows, extra insulation, high efficiency heating and cooling systems, EnergyStar packages, etc. Often the "high efficiency" features are options and therefore, not all homes in the same subdivision will have the same energy features.

During the verification process, attempt to discover what special energy features the comparable sale included. Any adjustments in this area should include the market's reaction to the contribution to value, which may be difficult if not impossible to determine.

Final Reconciliation

Use these lines in the URAR to make a summary statement of the value opinion form the approaches used. Discuss the strengths and weakness of the approaches in context of the quality of the data and its reliability from the market's perspective. Write a convincing statement for the reader to understand your logic as to "the most probable price" that the subject would command in the current market environment.

Additional Comments

This area is available to provide or expand on any comments made in other areas of the URAR. Since space is limited, use it wisely. Review appraisers have commented on various forums, that often they do not receive the complete appraisal report. Unless your pages are numbered, a reader, underwriter or reviewer may not be aware of other addenda or narrative that was included with the original report.

Its is a good idea to include references to your Housing Market Analysis, Clarification of the Scope of Work, Assumptions and Limiting Conditions and other addendum's at the very beginning of this area to alert readers or reviewers of their existence. For example:

This appraisal report includes attachments, exhibits, maps and other addenda that are considered necessary for the client or reader of the report to recognize the scope of work and development of the value opinion. They include important data and analysis that was deemed necessary to provide the client with a creditable value opinion.

Also included for the client is an addendum titled "Clarification of Assumptions, Limiting Conditions, Certifications and Scope of Work". This addendum clarifies and explains the process employed in this appraisal and details what the appraiser did and did not do with regards to this assignment.   

It is recommended that the client or any reader review the report in its entirety so as to gain a full awareness of the subject property, its market environment and the basis of the appraisal prior to using the value opinion in a business, investment or underwriting decision.

By incorporating references to your addenda in the comments area, should any part of the report not be sent to a reviewer, client, etc., you will have noticed the reader that applicable and perhaps vital information may be missing.

While some of you may contend that exclusion of any part of the original appraisal report "invalidates" the review process, a statement similar to the above example may be the one item that resolves issues before you have to deal with them.

Next up in the series, "To Cost or Not to Cost ... That is the Question.

See Also:  Part 11 - Overlooked & Under-Reported

AUTHOR:  Patrick Egger is a Certified General Appraiser located in Las Vegas, NV. He teaches continuing education classes on the housing market, appraisal issues for real estate agents and appraisers. He can be reached at lvreqa@cox.net  Look for the new Outside The Boxes category for a collection of Patrick's articles on Appraisal Scoop!