So Punk, Can You Prove Your Adjustments, Go Ahead Prove Them !

[ucbruin]

on 2nd house
+$5,000 for GLA adjustment
-$25,000 for quality adjustment
-$20,000 for condition adjustment

Don't hate me just because I'm that good. I take PayPal.

"Don't hate me just because I'm that good."


I could never hate you RG!!!!

 

[Deleted member 130081]

Can a single 2 sales data set, as your example shows, truly provide supportable $/GLA adjustment????

How about instead of.... House A traded for $100k. It is 1000 SF and dated. House B traded for $140k. It is 1200 SF and renovated. Solve for the difference in GLA.

We have this instead....House A traded for $100k. It is 1000 SF and dated. House B traded for $140k. It is 915 SF and renovated. Solve for the difference in GLA.

Speaking to all peers here...

Well hey, if you are willing to ignore the fact you need isolative data to extract an adjustment using matched pairs, it all works out just fine. Just ask J how to do it if you need advice.

There are something like 26 possible adjustments on a 1004 sales grid. Without getting too nit-picky here, that equates to 52 comparable sales to do matched pairs. Each of these sales would need to be paired (26) and each of those would need to be identical, except for the one feature, and each would need to represent the 26 different features. And all of that, is to produce just 1 data point for each feature. Anyone care to calculate the odds of acquiring the data? How about if you would prefer to have more than just 1 data point? I have more faith in winning the Powerball. The expectation, that dollar adjustments can be extracted, in a manner that is credible AND in a manner that can be supported, and when I say supported I mean in the sense you could present it on paper, which is the likely expectation of mortgage clients (certainly the expectation of the AMC the OP is dealing with here), is unrealistic. If matched pairs is considered the preferred and best method, what does that say about the other methods? Not all appraisal problems can be solved.

That said, IMO, adjustments we make on a regular basis are often/usually market-based and credible. How can I make such a claim after the previous paragraph? Because we analyze the trends in market data every day, for years on end. I don't know about the rest of you, but when I do an appraisal, I start with all sales in a market, not just the ones comparable to my subject. I ask the age old question as I go through them, why do some properties command more and why do some properties command less? I see patterns emerge and I can see changes in price points along the way. From there I isolate the properties competitive to my subject and go through them the same way I went through the entire market, asking why properties might sell for more or less, identifying trends. I call this method a trends analysis and it is from this, that I base my adjustments. Is it perfect? Nope. Can I prove the dollar amounts specifically? Nope. Is it credible and based on an analysis of market data? I happen to think so and yes. Would it fly with a mortgage client or state board? Maybe, maybe not. However, USPAP has a provision that states we must be ready to defend our actions or inactions that may appear to others to be wrong (paraphrase). I would rather explain why I did it this way, than explain why I did it in a manner that has more holes than Swiss cheese. Its easier to prove how the "recognized" methods are not credible, than it is to prove how they are credible. So, I punt. Maybe we might eventually all "recognize" these sorts of things.

Others have stated the "bracket method" is a good one. I tend to agree with that, so long as we are only talking about over-all general value, all features considered. Whoever decided that bracketing all features on a sales grid somehow provides support for the specific adjustment, fails to understand the math and method. It aint rocket science.

Speaking of rocket science, I did an appraisal for a real-life rocket scientist a while back. It was an estate, so I was free to talk about the appraisal. He wondered how we did it. He simply couldn't figure out how we could derive adjustments in the specific manner we do, considering the quantity of data available and the influences that affect the data (human nature issues). He said he would pull his hair out if tasked with what we do. So I explained it to him and was honest about it. He thanked me for being honest and then started telling me about the other appraiser he had hired (he was smart enough to get two opinions). The other appraiser filled him up with the usual BS, the sort you can find posted all over this forum, and he was not impressed, at least in a good way. Public trust is not only important, its the entire purpose of USPAP. Give that a think the next time you want to concoct a story of how you "credibly" extracted those adjustments.

I wonder how the tunes would change if we really were put to the test, such as submitting our work files that supposedly contain the data and math, rather than offering a written "summary" in the report. LOL. But our lender-clients don't want that my friends, they would prefer we were accomplices. Careful now.

Again, this is an example of how a single voice could help our profession.

 

[ucbruin]

Speaking to all peers here...

Well hey, if you are willing to ignore the fact you need isolative data to extract an adjustment using matched pairs, it all works out just fine. Just ask J how to do it if you need advice.

There are something like 26 possible adjustments on a 1004 sales grid. Without getting too nit-picky here, that equates to 52 comparable sales to do matched pairs. Each of these sales would need to be paired (26) and each of those would need to be identical, except for the one feature, and each would need to represent the 26 different features. And all of that, is to produce just 1 data point for each feature. Anyone care to calculate the odds of acquiring the data? How about if you would prefer to have more than just 1 data point? I have more faith in winning the Powerball. The expectation, that dollar adjustments can be extracted, in a manner that is credible AND in a manner that can be supported, and when I say supported I mean in the sense you could present it on paper, which is the likely expectation of mortgage clients (certainly the expectation of the AMC the OP is dealing with here), is unrealistic. If matched pairs is considered the preferred and best method, what does that say about the other methods? Not all appraisal problems can be solved.

That said, IMO, adjustments we make on a regular basis are often/usually market-based and credible. How can I make such a claim after the previous paragraph? Because we analyze the trends in market data every day, for years on end. I don't know about the rest of you, but when I do an appraisal, I start with all sales in a market, not just the ones comparable to my subject. I ask the age old question as I go through them, why do some properties command more and why do some properties command less? I see patterns emerge and I can see changes in price points along the way. From there I isolate the properties competitive to my subject and go through them the same way I went through the entire market, asking why properties might sell for more or less, identifying trends. I call this method a trends analysis and it is from this, that I base my adjustments. Is it perfect? Nope. Can I prove the dollar amounts specifically? Nope. Is it credible and based on an analysis of market data? I happen to think so and yes. Would it fly with a mortgage client or state board? Maybe, maybe not. However, USPAP has a provision that states we must be ready to defend our actions or inactions that may appear to others to be wrong (paraphrase). I would rather explain why I did it this way, than explain why I did it in a manner that has more holes than Swiss cheese. Its easier to prove how the "recognized" methods are not credible, than it is to prove how they are credible. So, I punt. Maybe we might eventually all "recognize" these sorts of things.

Others have stated the "bracket method" is a good one. I tend to agree with that, so long as we are only talking about over-all general value, all features considered. Whoever decided that bracketing all features on a sales grid somehow provides support for the specific adjustment, fails to understand the math and method. It aint rocket science.

Speaking of rocket science, I did an appraisal for a real-life rocket scientist a while back. It was an estate, so I was free to talk about the appraisal. He wondered how we did it. He simply couldn't figure out how we could derive adjustments in the specific manner we do, considering the quantity of data available and the influences that affect the data (human nature issues). He said he would pull his hair out if tasked with what we do. So I explained it to him and was honest about it. He thanked me for being honest and then started telling me about the other appraiser he had hired (he was smart enough to get two opinions). The other appraiser filled him up with the usual BS, the sort you can find posted all over this forum, and he was not impressed, at least in a good way. Public trust is not only important, its the entire purpose of USPAP. Give that a think the next time you want to concoct a story of how you "credibly" extracted those adjustments.

I wonder how the tunes would change if we really were put to the test, such as submitting our work files that supposedly contain the data and math, rather than offering a written "summary" in the report. LOL. But our lender-clients don't want that my friends, they would prefer we were accomplices. Careful now.

Again, this is an example of how a single voice could help our profession.

"...to defend our actions or inactions..."

Since becoming an AF member and reading the posts from the GOOD appraisers, I've wondered why we, as an industry, are not required to support our reasons for making no adjustments, as you point out in your "inactions" sentence.

I'm glad we don't because the author of my Book doesn't have a chapter regarding Supporting no Adjustments!!!!!

 

[Meandering]

"...to defend our actions or inactions..."

Since becoming an AF member and reading the posts from the GOOD appraisers, I've wondered why we, as an industry, are not required to support our reasons for making no adjustments, as you point out in your "inactions" sentence.

I'm glad we don't because the author of my Book doesn't have a chapter regarding Supporting no Adjustments!!!!!

Then you don't have the Pennsylvania version of the book.

Adjustment?

You don't need no stinking adjustment.

You just need a different buyer.

 

[Deleted member 130081]

This conversation misses the entire point of making adjustments is to minimize the economic differences between the subject and the comps,
Not to pove the market valued one item is $X or another item at $B, in every single transaction where those items are present,
which,
is what the AMCs wants to have,
because it's easier to program the computer that way,
when you write the Big Book of Adjustments
for them.

Too many Designated Old Guys (DOGs) who have not appraised a residential property in decades, directing the writing of programs to programers who have never appraised real estate.

But go ahead and give the DOGs an updated version of the Big Book of Adjustments.


.

.

Yes and no. Yes, the sales grid and adjustment method was created to serve that purpose, to illustrate the economic differences between the subject and comps. Nothing bad there. Keep in mind however, the sales grid was invented before we had the access to the data we now have, when I bring up point #2.

The AMC is not asking the appraiser to prove their adjustments because they want to populate a program (though that is also a reason, but not the AMC objective). The AMC is asking the appraiser to prove their adjustments because if they don't, the loan is not eligible for sale to FNMA. The Selling Guide says (paraphrase, these 3 things are part of 2 of the "Unacceptable Appraisal Practices") that an appraiser must make adjustments on the sales grid when appropriate, the adjustments must be market derived and that the adjustments must be supported within the report. Read it for yourself, as you are the sort of person who enjoys that sort of reading, and likes to consider what these things mean. If any of the Unacceptable Appraisal Practices are identified in an appraisal, the loan is ineligible for sale to FNMA. The AMC is actually doing their due-diligence here! The problem is that the requirement is impossible. FNMA does not provide the underwriter of what "support" means, just that it is required. What's an underwriter to do? Simple. They ask the appraiser to write a comment stating the adjustments are market based and credible, and as long as it sounds good and the report includes a signature - good to go. The other option being used is requiring all features be bracketed, which is pretty darn funny in terms of credibility and not so funny in terms of how it makes us tear our hair out.

 

[Deleted member 130081]

"...to defend our actions or inactions..."

Since becoming an AF member and reading the posts from the GOOD appraisers, I've wondered why we, as an industry, are not required to support our reasons for making no adjustments, as you point out in your "inactions" sentence.

I'm glad we don't because the author of my Book doesn't have a chapter regarding Supporting no Adjustments!!!!!

I agree. An adjustment not made is just as significant as one made. The FNMA stuff actually calls for this.

 

[Riick]

...as some appraisers think a credible and supported adjustment
is similar to a painter opening a can of paint, throwing it on the wall,
and calling it painted.

LOL... And when I used to sell property, they'd say,
Throw enough (ummmmmm....) *spaghetti* on the wall,
'till some of it sticks. (Skippy of course, would talk about throwing peanut butter )

 

[Riick]

The problem is that the requirement is impossible. FNMA does not provide the underwriter of what "support" means, just that it is required. What's an underwriter to do? Simple. They ask the appraiser to write a comment stating the adjustments are market based and credible, and as long as it sounds good and the report includes a signature - good to go.

Several years back, someone here effectively said...

You need *something* to hang your hat on, it may not be 100% right/correct, and, maybe your analysis is cockeyed & befuddled, and your data might be somewhere between marginal and a joke, but you need some justification for (or against) an adjustment.​

 

[jay trotta]

The "rules" for appraisers, written by FNMA, are included in the GSE forms. When it comes to adjustments, the only written "rule" is the statement concerning concessions.

The underwriter does not really care if your adjustments are supported or not. What they want, is for the appraiser to state that they are, and then sign their name to that. Once an appraiser does that, so long as the statement is "worthy of belief", the underwriter can conclude (achieve plausible deniability) the appraisal qualifies, which allows the loan to illegible for sale to FNMA. If an appraiser writes a bunch of BS to satisfy the underwriter demands, they are participating in mortgage fraud.

Expectations of FNMA? FNMA expects the appraiser to act impartially, as they are professionally licensed to do. FNMA expects the underwriter will follow the rules written for underwriters (The Selling Guide), which includes not undermining the appraiser independence. FNMA does not expect the underwriter and appraiser to act together to produce a BS document. FNMA expects that some appraisals will not measure up and subsequently, not all loans will be eligible. In this event, it might not have anything to do with an appraisers competence (though that could be the case too), it might just be that there are instances when the data does not allow an appraiser to produce a result that qualifies for their program. For instance, 1004 form Cert #4 states in part "...I have adequate market data to develop a reliable sales comparison approach for this appraisal assignment." So, if you have one of those properties/assignments where the data stinks, FNMA is expecting you to withdraw from the assignment, as your professional ethics would keep you from signing the report. However, FNMA is not the client, the originating lender is. So if the appraisers says "I have no comps", and the lender says "Do your best", there is nothing wrong with that, so long as the appraiser clearly discloses the discrepancy in the report. In essence, the client is asking you to complete an assignment that is not eligible for sale to FNMA, which is fine, until they go ahead and sell it to FNMA. The vulnerability of the appraiser here is if they do not clearly disclose the discrepancy in the report, otherwise, its all on the lender, who is the party with a relationship with FNMA. Best practice in these cases is to not use the GSE form for the assignment.

So if you cite you used matched pairs, when anyone with half a brain can go back and see that would be impossible, you put yourself in a very precarious position. Best to just be honest about the whole thing IMO.

Settle down big fella, Barking Expectations won't get me excited or nervous

 

[timd354]

"...to defend our actions or inactions..."

Since becoming an AF member and reading the posts from the GOOD appraisers, I've wondered why we, as an industry, are not required to support our reasons for making no adjustments, as you point out in your "inactions" sentence.

I'm glad we don't because the author of my Book doesn't have a chapter regarding Supporting no Adjustments!!!!!

We have pended many appraisasl asking the appraiser to provide support for a lack of adjustments for certain features if the lack of an adjustment is not sufficiently explained, especially if that feature is not bracketed.