Important Updates

According to: The Dictionary of Real Estate Appraisal; Appraisal Institute

Definition of Bracketing: A process in which an appraiser determines a probable range of values for a property by applying qualitative techniques of comparative analysis. The array of comparables are divided into two groups-those superior to the subject and those inferior to the subject. The adjusted sales prices reflected by these two groups limit the probable range of values for the subject and identify a bracket in which the final value estimate will fall.

Have you ever been told by a lender, investor, underwriter, processor or reviewer of a mortgage loan transaction that FHA requires the subject's purchase price to be bracketed by the comparable sales utilized in the appraisal report or the loan will not close? How about bracketing the square footage?

And if the client give you enough time to confirm with HUD, does HUD always seem to give conflicting answers? Don't forget this question, but don't answer it until you have read down further.

Well, we finally got to the bottom of it for you. According to USPAP the purchase price should never play a role in analysis and conclusion of an appraisal report, which is exactly what the client is attempting you to do when mandating bracketing. Never overlook a perfectly good comparable just to satisfy bracketing desires of the client, doing so may cause you not to be in compliance with USPAP.

Bracketing as defined above is a common methodology utilized by appraisers, however, it should not and is not mandatory. The definition describes the two groups to be superior and inferior to the subject. Do not mistake this to mean a higher sales price and a lower sales price, this would get you into trouble. As most of you are aware, there will be occasions when bracketing is simply not possible without misleading the intended user. In these cases, HUD simply asks for an explanation as to why bracketing was not utilized.

Please feel free to read and/or refer to the email string below concerning this topic should you find yourself in a similar predicament.

In selecting comparables, use the bracketing method. Bracketing, as defined in The Dictionary of Real Estate Appraisal, Fourth Edition, Appraisal Institute, is “a process in which the an appraiser determines a probable range of values for a property by applying qualitative techniques of comparative analysis to a group of comparable sales. The array of comparable sales may be divided into two groups – those superior to the subject and those inferior to the subject. The adjusted sales prices reflected by these two groups limit the probable range of value for the subject and identify a bracket in which the final value opinion will fall.” It is advisable to bracket sales using both dwelling size and sales price whenever possible. If bracketing is not possible, the appraiser should explain why. “

Remember the question above? Now is a good time to give your answer.

I have a question/concern about bracketing that just came up 5 minutes after our call. Bracketing the sales price has never set well with me per USPAP appraisers are not suppose to base opinions or comparable selections on the subject’s sales price. Who do I refer her to? Everyone needs to keep in mind that any time delays will only frustrate my client and influence them to not do business with me since most other appraiser will just submit to their demands.