Appraisal reconciliation is the final step of a commercial real estate appraisal: the appraiser considers the value indications produced by the income, sales comparison, and cost approaches and synthesizes them into a single value conclusion. It's not a simple average — it's a judgment about which approach is most relevant for the specific property and market, and how much weight to give each one.
The income approach typically gets the most weight for income-producing properties (offices, multi-tenant retail, multifamily, industrial) because it directly reflects how investors price those assets. The sales comparison approach is most relevant when the market has many recent transactions of similar properties — it shows what the market is actually willing to pay. The cost approach matters most for new construction, special-use properties, and insurance valuations where reproduction cost minus depreciation is the most defensible measure.
Reconciliation is where the appraiser's professional judgment is most exposed. A sloppy reconciliation simply averages the three numbers; a rigorous reconciliation explains why one approach is more reliable than the others for this specific property, addresses any wide divergence between the indications, and arrives at a final number that an experienced reviewer could defend. Under USPAP and CUSPAP, the appraiser must document the reasoning explicitly.
When the three approaches diverge significantly, that divergence is itself a finding worth explaining. Wide spreads usually mean either the market is shifting, the property has unusual characteristics, or one of the approaches has weak data behind it. Sophisticated readers of appraisals look at the spread and the reconciliation reasoning before they look at the conclusion — that's where the appraiser's real analysis lives.
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