In one sentence
The section of an appraisal where the appraiser weighs the income, sales comparison, and cost approaches and explains the reasoning behind the final value conclusion.
The longer version
Three approaches rarely agree. Reconciliation is where the appraiser says which one carries the most weight for this property and why, and that reasoning is more useful to a lender than the number itself, because it reveals what the value depends on.
Reviewers focus here. A reconciliation that leans on the income approach with an aggressive cap rate, or on comparable sales that required large adjustments, tells the credit team where the value is soft. Regulated lenders also document an appraisal review, and that review turns on the reconciliation.
Common questions
- Why do the three approaches give different values?
- Each reflects a different perspective: what the property earns, what similar properties sold for, and what it would cost to rebuild. Data quality and applicability vary by property type, so the results diverge.
- Which approach usually carries the most weight?
- For income-producing commercial property, the income approach. Sales comparison supports it, and the cost approach is usually least relied on except for new or special purpose buildings.
- What is an appraisal review?
- A separate assessment, required for many regulated lenders, confirming the appraisal complies with standards and that its assumptions and conclusions are reasonable. It is a distinct document in the file.
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