Reconciliation

The process of reconciliation by definition is a final resolution. This process is the next to last component of the valuation process, bringing various techniques and values into a single opinion of value. Reconciliation can encompass an array of valuation processes and is used when there is no clear cut way to determine the exact method appropriate to estimate the value of a particular piece of property.
The sales comparison approach, the cost approach, and income capitalization approach are the most common combined approaching when doing a reconciliation. These three approaches will have different weighted values depending on the different variables associated with a piece of property. For example, the income capitalization approach is less significant in the valuation of one-unit homes, but will be weighted the most when you are valuating multi-tenant office buildings. The cost approach has little effect when appraising a 60 year old house, but will be weighted more when considering the value of opening up a new business as opposed to purchasing an existing site. Lastly, the sales comparison approach is the only exception because it is usually applicable in all markets, but might suffer a bit in markets where data is hard to find for comparisons.
The emphasize of any appraisal report should be tailored to the market characteristics. The emphasis of different approaches should mirror the behavior of the current market participants. If a market relies heavily on comparable listings as the determinable value, then naturally the comparable sales would become the most heavily weighted approach. If the market happens to rely on cash flows, then the income capitalization approach is best served. If the market place compares existing properties to the cost of new construction, then the cost approach is undoubtedly the most significantly weighted approach. The reconciliation approach is used when the three approaches are not completely accurate in their own entirety.
The reconciliation approach helps with accuracy when it would be difficult to value using only one of the three approaches. The final estimate is not required to have a single point estimate, but clients prefer to have an exact number. Reconciliation allows for a more precise estimate because of the additional information provided by using all three approaches. Reconciliation is a valuable tool in real estate appraisal and should be used when data is not definitive or abundant in any one individual valuation approach.

Blog Post 3 submissions, so far

I just finished commenting on the blog post 3 submissions.  If you have submitted your final interview to me and I have not replied, with comments, in an email, please send me a note (I am concerned that a submission may have gotten buried in my email inbox).  For those of you who needed extra time, please do not forget that the final deadline is Tuesday.

Blog Post 3 Deadline Extension

The deadline for blog post 3 is tomorrow but I can see that many of you could use an extension.  Therefore, I am extending the deadline to December 14th.

Remember, you will submit your paper to me by email in Word format (please include all exhibits).  After I reply to you, then your can email the paper to your interviewee and ask him or her for their permission to post to the paper on our class blog.

Informational Interviews: Comments

Don't forget that at least 1/3 to 1/2 of your informational interview questions should be related to real estate valuation.  I think we will find that property values and valuation skills are important to every aspect of the real estate industry.

You may conduct your informational interview in person, by phone, or by email.  I would recommend that you ask your interviewee for their format preference.  Also, I would suggest that you try to physically meet with your interviewee to make a more personal connection (dress professionally and be on-time!).  If you conduct the interview in person or by phone, you must ask the interviewee if you may record the session.  If they do not agree, do not record under any circumstances.  You must take good notes.

Please tell your interviewee that you will email your final version of your interview to him or her.  In this email, you will ask your interviewee for their permission to post the interview on our class blog (https://sites.google.com/site/fin181hansz/).  Please make sure that they know this is a public blog.  We will not post any interviews without the interviewee's permission.  Don't forget you could include photos of the person, their office, or business logo with their permission.  Also, please consider any other appropriate visuals including tables, chart, graphs, maps, and other photos.

You may do some minor editing of the answers but do not alter the intent or content of the answers.  If some questions were misunderstood, inappropriate, or the interviewee simple preferred not to answer the question, you may exclude question from the interview.  It will depend on the length and nature of the questions and responses but it looks like 10 to 15 questions are most appropriate.  Remember, you may need to exclude a a couple questions.

Please do not forget to write a good introduction and conclusion to your information interview.  The introduction should introduce the person you are interviewing (at a minimum the person's name, company, affiliation, industry they work in, years in the business, and the geographic region they typically cover).  The final paragraph should summarize and synthesis your findings from the interview with respect to valuation in your interviewee business and industry.  Also, do not forget to thank your interviewee in person and in the paper itself (the introduction or most likely the conclusion).

For this assignment, please email me your informational interview in a Word file attachment by the assignment due date. I will grade the assignment and return it to you by email.  You can then send your paper to the interviewee and once you get their permission, you can post it on the course blog. Good luck and enjoy the assignment.  This is a good opportunity to meet someone in the real estate industry.

Informational Interviews

Please post a draft of your Informational Interview questions on this blog by next Thursday. (Don't do the actual interview, yet, just post the questionnaire that you have developed.)

Good mix of interviewees so far.  We have two homebuilders so we are covered in this area.  However, we do need to find a residential appraiser, commercial appraiser, and tax assessor.  Also, if you have contacts out of the Fresno area (say, Germany for example), see me about your topic.

ETS Criterion

ETS Criterion is ready to go.  See our course website for sign-in instructions.  When you login, look for our class, FIN 181 #71940 and the Blog Post 1 assignment.

Blog Post 1: Appraisal Keyword

To get started with a blog post, please make a post and indicate the appraisal term that you have selected for your first blog post.

FIN 181 Valuation Blog Post Extra Credit Option

This is entirely at your option but I will give all FIN 181 students an opportunity to score 0, 1, 2 or 3 (the max being reserved for very high quality research pieces) percentage points on your final class grade.  The extra credit assignment is to research a real estate valuation topic and author an original post on our class blog www.fin181.blogspot.com.

This optional assignment is a research paper, not an opinion or thought piece, and you must cite all your work (and, of course, absolutely no plagiarism).  The number of points you receive will depend upon the quality of your blog post (including the amount of research, organization, writing, and, yes, spelling and grammar).   [I have given 0 points for half hearted attempts.  Don't attempt this option unless you are serious about posting good work on the Internet.  Anyone will be able to access your post including fellow students, faculty, family, and prospective employers!]

This option is open to individuals (no groups for this one).  For samples of past student blog posts, please visit www.gazarian.info.  Examples of appropriate topics include the follow:

• valuation of water rights
• valuation of special use properties
• valuation issues in agricultural land
• valuation of 'green' features
• valuation ethics
• valuation based indexes (such as NCREIF, IPD)
  
• valuation and issue in the secondary mortgage market
• mass valuation techniques
  
• and many, many others...

You are welcome to discuss your general topic idea with me before/after class or via e-mail.  I will also grant you posting rights to the class blog.  Exceptional posts will also be posted to www.gazarian.info.

DEADLINE FOR ALL POSTS: December 6th, but ideally I would like to have the posts spread out over the course of the semester.  For any credit consideration, the post must be made on or before December 6, 2009.