formula for time adjustments

[Dennis J. Black ASA IFAS]

Steven has a secret

and he is not sharing. I feel that we should all band together and sue him for unfair forum practices. Whose in?


If a pair of pants is worth 67 million, this is worth 67.1 million. I have suffered emotional stress.

 

[Brad Ellis]

CW,

Be very careful.

An old AI instructor of mine talkede about this at length in one of my CE courses years ago. His opinion, and I confirmed it with many others in the Institute at teh time (but do not have written documentation) is that the only legitimate way to calculate a time adjustment is to find comps that sold and then re-sold within defrineable periods at different prices where you KNOW the only thing that happend is the passage of time.

Please note that I said "comps" and not just other sales.

You can have a neighborhood in which only the 3 BR homes have changed while the 4BR have not. The notion also that homes go up or down at some fixed monthly rate is just silly.

If you have the data use a hard dollar adjustment based on the market data. Otherwise, leave it alone. You must be able to measure adjustments by some recognized technique or method.

Dennis B.,

YES! Let's GET Santora fro being such a noonik about sharing!

Brad

 

[Stephen J. Vertin MAI]

אֵל אֱלֹהֵי יִשְׂרָאֵל

Gee I can even do Hebrew now!!!

 

[Fred]

Aha, Vertin makes my case. It's the triumph of ingenuity over the dark side of the force. Well, that and a rudimentary knowledge of word processessing. Poker anyone? § ¨ © ª

 

[hastalavista]

CW,

Be very careful.

An old AI instructor of mine talkede about this at length in one of my CE courses years ago. His opinion, and I confirmed it with many others in the Institute at teh time (but do not have written documentation) is that the only legitimate way to calculate a time adjustment is to find comps that sold and then re-sold within defrineable periods at different prices where you KNOW the only thing that happend is the passage of time.

Brad-

I would question that being the "only legitimate way". It may be one of the best ways.

I would argue that one could make a reasonable case for market-trend adjustments based on an analysis of a larger set of data, also; especially if the selected comparables fall in line with the larger data when the adjustment that the trend indicates is applied.

If the older comps, once adjusted for typical value component differences, and then analyzed via a trend analysis, are adjusted to a value that is consistent with the most current comps, I'd say the results were proof enough that the trend analysis was sufficient given the intended use of a mortgage finance transaction assignment.
(I wouldn't want to make that same argument with litigation work; I'd use the trend analysis and then double-check it with sale "A"(then) vs. "A"(now) sale.)

There was a recent article in VIP regarding time adjustments. The point of that article (which I agree) was to be careful of the data set used to extrapolate a market-specific adjustment.


And, to take this one step further, let's use the example where all the recent comparable sales adjust to a $500k+/- level, but the current available comparable listings are at $470k+/-; there is no "A"(sold then) vs. "A"(listed now) to pair. Who wants to argue persuasively that it is not appropriate to consider a market time adjustment of -6% to reflect the current market environment because there are no matched set of sales?

 

[Joyce Potts]

And, to take this one step further, let's use the example where all the recent comparable sales adjust to a $500k+/- level, but the current available comparable listings are at $470k+/-; there is no "A"(sold then) vs. "A"(listed now) to pair. Who wants to argue persuasively that it is not appropriate to consider a market time adjustment of -6% to reflect the current market environment because there are no matched set of sales?

In my opinion, you have paired (generalized) MARKET DATA and that's exactly the correct way to do it!

 

[Fred]

Denis,
I didn't read Brad to mean ONLY the sale and resale of the same house. Maybe you are right.

 

[hastalavista]

Brad was quoting someone else, so it may not be Brad's position.

I'll hold judgment until Brad quotes Brad.:icon_wink:

 

[Couch Potato]

When reading a statement on appraisal methods, and the phrase "only legitimately way" is found. One can be sure the statement is false.

 

[Brad Ellis]

Dennis, Steve,

Yes- regurgitating what the AI was holding to- not necessarily my own viewpoint.

There are any number of ways to do it but what concerns me is the cavalier way in which some apply the time adjustments. Mostly I see quotes of rates from newspapers- ugh. And then to assume that these changesd occur in some straight line fashion so as to break it down into a monthly amount is, to me, tenuous.

So, if one is actually doing the work it is fine with me. Date of sale/time is a variable that can be plugged into or solved for so long as one is using the market data.

Very few actually do it, however.

Brad