What is a potential consequence of including unexplained deductions in the sales comparison approach?

Including unexplained deductions in the sales comparison approach can raise the possibility of perceived discrimination because such deductions can appear arbitrary to those reviewing the appraisal. When deductions are not adequately justified or made clear, they may lead stakeholders to believe that the appraiser has introduced bias or unfairness into the valuation process. This is especially true if certain demographic or socioeconomic factors are inadvertently considered in the deductions that have not been clearly articulated.

In real estate appraisals, transparency and clarity are critical. Changes or deductions made to comparable sales must be thoroughly explained to ensure that all parties involved can understand the rationale behind the valuation. If these deductions seem to disproportionately affect certain types of properties or populations without clear reasoning, it may be perceived as unjust or discriminatory. This perception can damage the credibility of the appraisal and raise legal concerns, fostering distrust among clients, peers, and the community at large.

Consequently, it’s essential for appraisers to provide comprehensive justifications for all deductions to promote fairness and avoid the implications of bias in their assessments.