"Bracketing" is a process that many lenders require appraisers to apply in their reports when choosing sales comparables. Though the definition is a little wordy and confusing, it basically means that when possible, appraisers should include sales comparables that are inferior, similar, and superior to the subject. Inferior and superior doesn't just refer to condition, but also amenities and characters of the home, such as pools, gross living area, and various updates. They must also be inferior/superior within reason-- if the homes are too different, it can be like comparing apples to oranges.
The idea behind bracketing is that once adjustments are made, the appraiser should have a clear idea of where the value lies. If a comparable is superior, the appraiser makes a downward adjustment to make it equal to the subject. If a comparable is inferior, the appraiser makes an upward adjustment to make it equal. In a perfect appraisal world, all of the values would be exactly the same after adjustments and poof! The value would be clear. However, since this is rarely (if ever) the case, there is a range of adjusted values after adjustments are made. Bracketing can be an excellent way to verify if you are on the right track as far as value, and can be very useful for realtors when setting listing prices as well.
We have done appraisals where the listing price is the same as a recent sale that is several hundred square feet larger, with a pool, and a recently remodeled kitchen. In the use of bracketing, you would look at that sale and think that since the subject is inferior, the correct price is probably several thousand less than the superior sale.
However, is bracketing required for appraisers? In short, no, it is not required by USPAP (the equivalent of the Appraiser Bible). Many lenders do require it however, and many appraisers consider it a wise practice. Sometimes, it is just not possible, and appraisers have to get a little more creative. If it is possible, though, it can certainly make the value tighter and harder to dispute.
