Appraisers use bracketing to select comps with features and characteristics that are both inferior and superior to those of the subject property.
The goal is to attempt to bracket all features that require adjustments. Features may include items such as condition, lot size, living area, location, view, or amenities such a pool or garage.
In a perfect world, each property would indicate the same value after all adjustments are made. But…real estate is not perfect, and a range of adjusted values is typically formed.
Most lenders require the opinion of value to be bracketed by the sales prices/adjusted sales prices of the comparables.
Bracketing (per FHA)
Definition: Bracketing refers to selecting comparable properties with features that are superior to and inferior to the subject features.
Standard: Comparable properties must be selected based on the principle of substitution, and the analysis will reveal the relevance of that data. Comparable properties should not be chosen only because their prices bracket a desired or estimated value.
Required Analysis and Reporting: In analyzing the comparable pool to determine the best comparable sales to display and compare in the adjustment grid, the Appraiser must use Bracketing techniques when possible and appropriate.
Bracketing (per the Dictionary of Real Estate Appraisal, 7th Edition)
- In a quantitative analysis, a process in which an appraiser chooses comparable sales or listings that display both superior and inferior elements of comparison to the subject property.
- A process in which 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 3 groups – those superior to the subject property, those similar to the subject property, and those inferior to the subject property. The adjusted sale prices reflected by the sales requiring downward adjustment and those requiring upward adjustment refine the probable range of values for the subject property and identify a value bracket in which the final value opinion will fall.