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Remember that the whole purpose of this is
to come up with an estimated value for the
property.
We want to correlate the values indicated
from the different approaches we used and
to come up with a single value.
“Reconciliation is the method of bringing
together all of the data and analyses into
one final estimate of value.”
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The reliability of the data is crucial, garbage
in, garbage out
A wide spread in the estimates from the
different approaches indicates a strong
possibility there were mathematical and/or
technical errors made.
In theory, all of the approaches should lead
to the same estimate. But, for this you need;
The markets to function perfectly
 The appraiser to function perfectly
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That’s not likely to happen
The market is the market and sometimes things
don’t happen the way you’d expect. I think this
is especially true with land and land values
 It is important to strive for perfection but don’t
let that get in the way of being honest; don’t
manipulate data beyond its limits; one paired
sale isn’t the same as multiple and so on
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At the end, don’t forget to ask yourself, if the
property is really worth the value stated!
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Be sure to appraise as vacant land first
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Many buildings simply do not add value to the
property, even if they are new. Tobacco barns in
areas that quit growing tobacco, grain bins in a
cow-calf area, things that were build w/o
considering the demand or very specialized for
one operation
If there are improvements that add value
then evaluate as improved property;
The key is ‘do the improvements that add
value to the property’
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Remember that it is the market and market
conditions that are going to drive what will be
HBU
HBU is based on potential use, not actual use;
remember that buyers pay based on the
potential
There are transitional areas, eg., development
is moving in the direction but not there yet.
This means there can be an interim value and
then a terminal value
There can be speculative uses
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An appraiser working in a transition area has
to be very careful
Another aspect is if improvements are needed
for HBU, eg. Tiling
There are 4 basic question that need to be
asked to determine HBU
1.
2.
3.
4.
What uses are legal?
What uses are physically possible
For uses meeting 1 and 2, which ones are
financially feasible, ie, give positive net income or
non-monetary benefits
Of these uses, which one produces the greatest
return or benefit
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Legally possible;
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Be sure to do a title search looking for
restrictions;
Transfer of development rights; very popular in
some states and areas
 Life estates
 Conservation easements
 Restrictive covenants
 Downzoning
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Physically possible;
What are the characteristics of the property;
soils, slope, frontage, water,
 Characteristics will control what should be
considered for potential uses
 If there is a defect can it be corrected and will it
be? If the defect is going to be corrected then
the appraiser has to be sure and include the
cost for the correction
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Financially feasible options;
What will be the net income from a use, if
positive then it should be considered
 It is very important to remember recreational
and home properties; these will yield
nonmonetary benefits that have to be
considered
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Don’t be ridiculous in how far you go with
this analysis
The appraiser has to know the
neighborhood and the potential but it is not
their job to examine everything (vegetable
production, U-Pick-Ums, stables, etc.) All
possible uses that might result in higher
income but that isn’t the point of what the
appraisal is trying to determine
Appraiser has to use judgment