"Quantifiable Market-Derived Methods" for adjustments required by FNMA/USPAP

[Mike Ault]

Yes and no. When your data set is ~ 6 observations, some variance in extracted adjustments is expected - even in fairly homogeneous markets. I wouldn't expect that much a difference though...

Would you expect the adjustments to be crafted so that the adjusted value for all comparables wind up precisely the same, to the dollar? I just don't trust the methodology behind those type of appraisals, and I would need to see "inside the black box" before I could get on board with those. I do appreciate Bert's efforts in that regard, I would just need to be looking over his shoulder and pestering him with questions while he codes.

 

[djd09]

i'm lucky to get 3 sales that are somewhat correlate...especially with all the current waiver fraud

 

[alebrewer]

Would you expect the adjustments to be crafted so that the adjusted value for all comparables wind up precisely the same, to the dollar? I just don't trust the methodology behind those type of appraisals, and I would need to see "inside the black box" before I could get on board with those. I do appreciate Bert's efforts in that regard, I would just need to be looking over his shoulder and pestering him with questions while he codes.

Meh - that's always the goal, right? $0 range after adjustments? Unlike RCA, though, most appraisers will seldom find this attainable. This is due (IMO) to the inability to quantify every single nuance in a transaction.

 

[J Grant]

Would you expect the adjustments to be crafted so that the adjusted value for all comparables wind up precisely the same, to the dollar? I just don't trust the methodology behind those type of appraisals, and I would need to see "inside the black box" before I could get on board with those. I do appreciate Bert's efforts in that regard, I would just need to be looking over his shoulder and pestering him with questions while he codes.

Trying to line up an exact, same adjusted numerical value for the comps is contrary to the RE market, which sees people paying a variety of prices, sometimes for very similar properties. It would mean making modifications to make that happen. Market value can be a range, which is the natural adjusted range of the comps, and from there, we pick our best supported point value.

Bert, as far as I can tell, is trying to make the comps all adjust out to the same net sale price.

 

[J Grant]

Meh - that's always the goal, right? $0 range after adjustments? Unlike RCA, though, most appraisers will seldom find this attainable. This is due (IMO) to the inability to quantify every single nuance in a transaction.

Who defined 0 range as the goal?I have never seen that in USPAP or in appraisal coursework.

A narrower adjusted range is typically expected. And that reflects applying adjustments that make the goal of making the comps more similar to the subject in location and physical characteristics. Of course first, we apply any financing or concession needed adjustments to make the terms of sale of the comps align with the definition of MV terms of sale )

 

[Mike Ault]

Meh - that's always the goal, right? $0 range after adjustments? Unlike RCA, though, most appraisers will seldom find this attainable. This is due (IMO) to the inability to quantify every single nuance in a transaction.

"Motivation" being the primary one. 10 different buyers and sellers would most certainly arrive at 10 different sales prices for the exact same property. The property attributes would remain the same, so it's hard to quantify adjustments with that degree of accuracy and my adjusted ranges have never arrived at "the goal". More and better data, tighter ranges – less and weirder data – wider ranges, but never a zero $ value range.

 

[alebrewer]

Who defined 0 range as the goal?I have never seen that in USPAP or in appraisal coursework.

Explain to me what you think sensitivity analysis encompasses?

 

[alebrewer]

"Motivation" being the primary one. 10 different buyers and sellers would most certainly arrive at 10 different sales prices for the exact same property. The property attributes would remain the same, so it's hard to quantify adjustments with that degree of accuracy and my adjusted ranges have never arrived at "the goal". More and better data, tighter ranges – less and weirder data – wider ranges, but never a zero $ value range.

Exactly, although I'd argue that $0 range is possible in highly homogeneous markets - like maybe high rise condo's? Not frequent, but it happens.

 

[djd09]

how does the borg derive adjustments...

 

[Mike Ault]

Explain to me what you think sensitivity analysis encompasses?

Market derived adjustments which are "within reason", that judgment being based on decades of observing the typical motivations of buyers and sellers within the local market. I looked at his "zero dollar range appraisals" and the adjustments were simply crazy and considerably out of line with his peers. Sensitivity analysis should have constraints applied and those bounds should not be exceeded to arrive at "the goal". If his black box is so accurate that he can support every one of those adjustments in a reasonable, peer-reviewed manner, more power to him. This guy's black box failed that test.