Across The Board Time Adjustments?

[J Grant]

T " we are predicting a price that we call market value. And in a rapidly rising market in general but a relatively slow one in a particular neighborhood there is no reason why a continuation of that trend cannot be extrapolated from the comp sale date to the present. The prospective appraisal relies upon this predictive power almost exclusively."

A market value purpose assignment is typically not a price prediction (future price) How many assignments are prospective appraisals...Outside of relocation appraisals? .

Current inspection date effective appraisals are not, unless spelled out in assignment for a future date value, they are not prospective value, they are a theoretical value (as of the effective date., which usually is several days past to signature date)

The purpose of time adjustments is to bring older sales that occurred during a period of rising or declining values, to bring them in line with market conditions as of current appraisal effective date .It's not to see what future price they would bring after the effective appraisal date.

 

[DARREN GODFREY]

T " we are predicting a price that we call market value. And in a rapidly rising market in general but a relatively slow one in a particular neighborhood there is no reason why a continuation of that trend cannot be extrapolated from the comp sale date to the present. The prospective appraisal relies upon this predictive power almost exclusively."

How many assignments are prospective appraisals? (what will the market value be on 6 month forward eff date), how many appraisers ever get a future date value purpose assignment like this? Outside of relocation appraisals, what assignments (a fraction) cal for a prospective future value? A ..

Current inspection date effective date assignments are not prospective (future) values. They are theoretical values as of the effective date.

The purpose of time adjustments is to bring older sales that took place during a period of rising or declining values to their most probable price ( after other adjustments ) as of the effective appraisal date. It's not to see what future price they would bring after the effective appraisal date.

Exactly , we are not predicting the future , we are looking back to reconcile the data with the effective date.

 

[BRCJR]

You know , i don't have a problem with across the board adjustments per say, but an across the board time adjustment is in fact predicting a future value it would seem perhaps if it was used for an older comp it would make sense. What this appraiser did however was say that this property would sell for this much today IF the trend continued...what if he wrote the report at 11:59 and the fed bumped the rate up 2 full points by 12.

In my opinion a time adjustment is a sensitive thing...at least you last sale chronologically shouldn't have one.

What if your last sale, chronologically, was 3 months ago and the sale before that 4 months ago and the sale before that 12 months ago? Are you going to adjust 12 and 4 but not 3, automatically because you believe the last one should not be adjusted?

The fact it was "the last sale" does not matter. What matters is what has happened, from a market condition viewpoint, since it sold.

 

[Pittsburgh Pete]

The purpose of time adjustments is to bring older sales that occurred during a period of rising or declining values, to bring them in line with market conditions as of current appraisal effective date .It's not to see what future price they would bring after the effective appraisal date.

But if data is dated, you are in effect predicting the future from the timeframe of the sales. If you have no contemporaneous sales, you must "predict" what has happened (where has the market gone) since the date of the sales data.

 

[J Grant]

Exactly , we are not predicting the future , we are looking back to reconcile the data with the effective date.

Yes , we typically look slightly back, since the effective date is usually a lag of X days prior to our signature date. We do consider the trending market conditions as of the effective date, and where they are going, not just where they went. However, for the time sales, they go up to the effective date of appraisal (or a market change shift point if applicable). The time adjustments are not supposed to provide a future value after the effective date. ,

 

[J Grant]

But if data is dated, you are in effect predicting the future from the timeframe of the sales. If you have no contemporaneous sales, you must "predict" what has happened (where has the market gone) since the date of the sales data.

If we have no recent /contemporaneous sales, and no listings, and no agents to interview and context in other properties activity where the market is trending (conditions), either we cant' complete the assignment, or we can't apply a time adjustment, since we have zero indicator for doing so.

Usually there is surrounding and relevant market activity, even if no immediate contemporaneous comp sales, to indicate if a time adjustment should be applied, as well as if a time adjustment applies to all sales or just those that sold influenced by different conditions than are now trending.
The point is not to predict the future from dated sales. The point is to bring dated sales, if their price was influenced by their sale date/contract occurring in a different market phase than now trending, to bring their prices to the current as of effective date

 

[J Grant]

What if your last sale, chronologically, was 3 months ago and the sale before that 4 months ago and the sale before that 12 months ago? Are you going to adjust 12 and 4 but not 3, automatically because you believe the last one should not be adjusted?

The fact it was "the last sale" does not matter. What matters is what has happened, from a market condition viewpoint, since it sold.

Agree..If market stabilized since the last sale closed 3 months prior, (or 4 months prior contract) why would we keep adjusting it upward? What are we adjusting it up to, if current eff date market conditions have been stable back from that sale to now and trend ? ( by looking at pending, listings, inventory as well as sales of properties in last 2 months, even if they are not comps for our subject)

 

[Terrel L. Shields]

The purpose of time adjustments is

we are not predicting the future

There is no such thing as a "time adjustment". Go back and read your copy of The Appraisal of Real Estate. It is a market conditions adjustment. Go to the index and see if it even has a mention of a "time adjustment". So if USPAP says we have to be aware of and employ "recognized methods and techniques" are you relying upon the "Bible" of appraising (aka "The Appraisal of Real Estate"?) Then go into that index and look up "Forecasting". It is there. About seven subentries in fact.

You are predicting the present- here now today, not the future. Because ALL your sales data is in the PAST. And, if you apply the Cost Approach, that is here, now, today. And if you apply the Income Approach, then that is based upon the principle of the ANTICIPATION of a future event. So are you saying that the Income and Cost approaches are not valid? In fact, in the income approach, "time" is central to the principle of the "time value of money".

Back to Market conditions. It is in the index. Quoting for the book both of you should own. "Although the adjustment for market conditions is often referred to as a "time" adjustment, time is not the cause of the adjustment. Market conditions that shift over time create the need for an adjustment, not time itself."

If you do not forecast, then you are ignoring something. You make a market forecast don't you? Regardless yesterday's data, if a local plant in a one horse town announced they were closing in 60 days would you blithely ignore the anticipated loss of jobs might impact home prices? Or pray Trump might intervene to save the jobs? If you read a local economics report saying there is a glut of new houses, do you think you might consider the possible (future, predictable) impact upon sales? Or simply assume if they build they will come? Apparently a lot of appraisers did exactly that in 2006. Despite insane building levels, vacant homes and and increasing DOMs, appraisers kept pushing the envelope under the assumption prices would not fall much, if any, and prices did increase by 10% over the past year. Wrong that they were, were they not thinking "Even if I am a little high, the market will catch up to me in a year." ?

My weather man forecasts today's weather based upon data accumulated over the past few days. You do the same. Your MV opinion is based upon your estimate which is derived from analyzing the data and forecasting the outcome you would anticipate today (or in a prospective appraisal in the future, and a retrospective appraisal in the past) New construction appraisals with a current value are hypothetical but again relies upon its accuracy upon the notion that nothing will change in the intervening time between your date of appraisal and that future point when the building is finished. And your final inspection is to verify that indeed what you forecast was, in fact, what happened.

fore·cast
ˈfôrˌkast/
verb
verb: forecast; 3rd person present: forecasts; past tense: forecast; past participle: forecast; past tense: forecasted; past participle: forecasted; gerund or present participle: forecasting

1. 1.
   predict or estimate (a future event or trend).

 

[Fernando]

One time a reviewer requested to make adjustments based on contract date. He may be right but that means I had to analyze contract dates for all comps. I adjusted what the reviewer wanted but my appraised value stayed the same.
It's not worth fighting over with. Adjusting contract dates not what my peers normally do.

 

[residentialguy]

There is no such thing as a "time adjustment.....

Good post, Terrel