Adjustments, how to determine?

[tim1962]

With so many complaints regarding adjustments in the sales grid, any suggestions for a book explaining USPAP compliant methods of obtaining data to use in making adjustments for differences between the subject and comparable properties? I utilize matched pairs and regression analysis and always have solid ground to stand on in my workfile when I determine an factor to use for adjustment purposes but want to be certain my approach can stand in case of a complaint.

 

[Meandering]

With so many complaints regarding adjustments in the sales grid, any suggestions for a book explaining USPAP compliant methods of obtaining data to use in making adjustments for differences between the subject and comparable properties? I utilize matched pairs and regression analysis and always have solid ground to stand on in my workfile when I determine an factor to use for adjustment purposes but want to be certain my approach can stand in case of a complaint.

If you read USPAP,

you will find there is no such USPAP standard, rule, opinion regarding adjusting comps for residential lending.

This might be part of your issues.

You don't know the rules you are mandated to follow....

USPAP.

.

 

[hastalavista]

I recommend you get Appraising Residential Real Estate (Appraisal Institute). It discusses various methods adjustment methods.

Good luck!

 

[Terrel L. Shields]

Adjustments are not mandated by USPAP. If you have actual paired sales, regressions, and sensitivity analysis in your work file, I don't see the board worrying about it. Your clients? If you don't bring home the bacon, yeah, they worry about it unfairly. AMCs? They are the like the little bull in the pasture bellowing at the big new bull. He's not going to challenge him, but does want to make sure the big bull doesn't mistake him for a heifer.

 

[Howard Klahr]

I utilize matched pairs and regression analysis and always have solid ground to stand on in my workfile when I determine an factor to use for adjustment purposes but want to be certain my approach can stand in case of a complaint.

As others have noted this is not entirely a USPAP issue. Where most residential appraisals fall short in terms of adjustments is in the actual reporting of the analysis that you actually performed. Having the information in your workfile is one thing but communicating to the client in a way that the adjustment is understood and what was done to determine the appropriate adjustment is often lacking.

 

[Amy Perkins]

Adjusting is not the only way to appraise, in narrative format many appraisers use ranking as a method for analysis. Either way, we are not required to make adjustments. Many banks will require explaination for adjustments that exceed guidelines. The guidelines for line item tend to be about 10%, which I found was inadequate for some luxury properties. I find that there are standard adjustments that "work" in my market for specific types of properties again and again. I will often make the standard adjustments I always make and then as my range of value is tighter I will use some matched pairing to extract out other adjustments. Functional obsolescence as a negative adjustment and view properties as a positive adjustment can depend on the whether the market is going down or up. For example, if you have a busy road and the market is undersupplied I might only extract out maybe 5%, however if the market is declining, that same adjustment might be closer to 10%. The reasoning behind this is when there is so much to choose from in a high supply market, why would anyone pay so much for a busy road. If there is an undersupply and buyers can't find a property to buy, they may be willing to take the property with the busy street for closer to the same amount. This is why I always stress the importance of agent interviews. If you have a sale that is an outside the range of the other sales, you should call and find out why.

 

[Amy Perkins]

Regression analysis is good for the lack of data assignments. Say you are doing a retroactive appraisal for 2013, but only have land sales from 2012 and 2014. If your average in 2012 was about $2 per square foot and your data for 2014 was about $4 per square foot, you could use regression analysis to fill the gap, this would be a trend line drawn would on your plotted x/y axis would be about $3 per square foot for 2013. Regression analysis sounds so much more complicated than it really is.

 

[Sunshine in VA]

Richard Hagar is having a webinar entitled "How to Support and Prove Your Adjustments 8/19/2014 for $49.

Research it and see if you would be interested in taking it.

 

[Pittsburgh Pete]

If you read USPAP,

you will find there is no such USPAP standard, rule, opinion regarding adjusting comps for residential lending.

This might be part of your issues.

You don't know the rules you are mandated to follow....

USPAP.

.

Who doesn't understand USPAP? While there is no direct standard, rule, or opinion regarding adjustments, you clearly haven't read SR 1-1a, and 1-1b--or don't see their relevance to his question.

 

[LordofTexas]

Richard Hagar is having a webinar entitled "How to Support and Prove Your Adjustments 8/19/2014 for $49.

Research it and see if you would be interested in taking it.

How did he come up with that $49 value. Did he compare it to other similar length / content classes and derive that final figure?