Reconciliation in Appraisal
Definition
Reconciliation is the final step in the appraisal process where the appraiser analyzes the value indications from all applicable approaches and arrives at a single final opinion of value. It is not a simple average of the three values.
Example
An appraiser valuing a single-family home obtains values of $320,000 from the sales comparison approach and $335,000 from the cost approach. The appraiser gives the most weight to sales comparison and concludes a final value of $322,000.
Exam Tip
Reconciliation is never a simple mathematical average. The appraiser uses judgment to weight the approaches. Know which approach typically gets the most weight: sales comparison for residential, income for investment properties, and cost for new or special-purpose buildings.
Related Valuation Terms
Real Estate Transfer Taxes
A transfer tax is a tax imposed on the transfer of ownership of real estate.
Property Tax Exemptions and Relief Programs
Various programs and exemptions exist to reduce the property tax burden for specific groups, such as seniors, homesteaders, or veterans.
Depreciation of Investment Property
Depreciation is an accounting method of allocating the cost of an asset over its useful life, allowing investors to deduct a portion of the asset's cost each year.
Property Tax Assessment Limits
Many states have laws to limit how much property taxes can increase each year, regardless of market value fluctuations.
Homestead Portability
Homestead portability allows homeowners to transfer a portion of their accumulated homestead tax savings to a new homestead in the same state.
Income Approach
The income approach estimates a property's value based on the income it generates by converting net operating income into a value estimate using a capitalization rate. It is the preferred method for income-producing properties.
Frequently Asked Questions
Test Your Valuation Knowledge
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