Adjustments in Michigan

[Aaron Lawrence]

I'm a limited licensed appraiser in Michigan and I need help with my adjustments. Is there a standard method in determining adjustments (ie. the value of a garage, hardwood floors, granite) or are people just winging it? If someone could give me their method of computing adjustments or a list of adjustments I'd greatly appreciate it.

 

[Mary Tiernan]

All adjustments are derived from the market. Some markets will indicate a higher adjustment for a garage than others, some markets will indicate a higher value for a fireplace, some markets will indicate a higher value for site size than others.

In my area I don't usually break down adjustments to hardwood flooring and granite, I try to utilize sales with similar materials. If sales with similar construction quality are limited, try to at least bracket the higher grade of materials, and perhaps adjust for superior/inferior construction quality.

All adjustments are derived from the market via paired sales analysis - in my area, the paired sales are typically the sales utilized in the appraisal which I have decided are most representative of the subject's market.

 

[Fred]

All adjustments are derived from the market

What if the variables in question are not in the market. For example, your subject is the only property that has an X, a Y or a Z. Every time that happens, there will be no "pair" with which to make a paired sale. What if you subject is just way larger, smaller, older, newer - that is, just way out of the range - on measured variabes. There is nothing wrong with matched pairs, if you can find them. Good luck.

In my experience, most adjustments are just made up; and supported with some claim of market extraction, but you may never see it in a report.

My advice is to study "relative ranking." It is demonstrated in the AI text. Start by simply ranking sales as better, worse or roughly equal to subject. Determine where within the range subject's value is. I assume you are doing only form reports. You can put the ranking table in the report (and if it was a commercial report you wouldn't need anything else). Go to the line adjustment grid and make some small pro forma adjustments (say, for GLA, lot size, age-condition or extras) to show how the range of value closes around you conclusion. That is, use relative ranking to solve the problem, while using the grid as a "visual aid." Then as time goes by, you might gain confidence in using adjustments, or better ye, invest some time in learning regression analysis, which is by far the best way to get "adjustments" from the market.

 

[Michigander]

agree with Steven on ranking

I find this to be the most useful tool and just plain common sense. It is also typically how buyers look at properties in terms of this "house is better than that house", or "that house is nicer because it is updated and has an extra bathroom". Paired sales can be supported and I have typically included my groupings of sales from which I have extracted an adjustment directly into the narrative, but I really like the ranking system in terms of finding the right range and which sale is most similar. Works great with current offerings as well.

Cheers

 

[Michigan CG]

I'm a limited licensed appraiser in Michigan and I need help with my adjustments. Is there a standard method in determining adjustments (ie. the value of a garage, hardwood floors, granite) or are people just winging it? If someone could give me their method of computing adjustments or a list of adjustments I'd greatly appreciate it.

Mr. Lawrence,

I am a little rusty on the requirements for being a trainee. I think you were required to take 75 hours to be a trainee, 15 Hour USPAP, 30 hour Principals, 30 hour Procedures...??...

I highly recommend you take a 30-40 hour residential class (or a few of them) if you want this to be your profession. If you are doing appraisals where is your mentor, and have they given you advice on this subject? Does your mentor work closely with you?

 

[Lee Lansford]

...If you are doing appraisals where is your mentor, and have they given you advice on this subject? Does your mentor work closely with you?

I appreciate that this is the place for appraisers to ask questions, BUT...the question is so basic (no offense intended, Aaron; everyone has to start somewhere) that those of us viewing the question has to wonder "where the heck is the Supervisor Appraiser????"

Now, the answer to the question: Adjustments are extracted from the market. It takes effort to become competent.

Good luck.

 

[Artemis Fowl]

I agree with Tim. This is a basic question that should be answered by your mentor. If your are not receiving adequate guidance...think about looking for a new one. As that is easier said than done...do what Mary said with paired sales and study up on relative ranking.

Steven summed up very nicely what he's been saying for years. Relative ranking makes it easy. I've been playing with regression to determine where the influence is and use the ranking table as a check. See an issue doing this for FNMA tho. Turned in a report last week and got a UW stip regarding the adjustments. "Sq footage adjustment SEEMS excessive.:glare: Please describe method used to determine sqft adjustment". Gave her an answer that probly left brains leaking out her ears. Be prepared to run into resistance if you do this because many fill out the forms in a way that looks pretty for UW rather than reflecting reality.

Asking for "The List" of adjustments reveals your current level of ability. You will learn that no two neighborhoods have the same influences...some are very similar but you need to determine that using the proper methods. To gain competency takes time and there is no shortcut. Read...a lot. Read some more. Build a library of appraisal related material and study it. Put on your typical buyer shoes and go to open houses in your free time. Do whatever it takes to learn.

 

[john snyder]

Sometimes its the market - sometimes it is whatever the reviewer allows.

I am kidding about the reviewer, however there have been times when I have had a reviewer tell me they just did not allow that amount of adjustment.

Steve and Serena are as close as it gets to using adjustments. When I am training someone I keep a list of general price range of adjustments for the grid. Its just a basic barometer that as Artemis said is adjusted depending on each appraisal problem price, neighborhood etc. The end result is a range and hopefully how the subject price ends up being bracketed. Of that which comp I think is the best one or two of three - or in todays world of five or six. Then apply the value writing a good reconciliation. Thats where I do some of my best work.

john

 

[John Wilson]

Now, the answer to the question: Adjustments are extracted from the market. It takes effort to become competent.
Good luck.

I've seen buyers pay full listing price because the toilets were extra clean.

That sale is now some future appraisers comp. What if this future comp is slightly larger than a future subject?

How does the future appriaser extract those clean toilets from the market?

He won't, he'll adjusts to GLA.

 

[Jason Barber]

Michigan Adjustments

Aaron, it's a shame that nobody here could help you with such an easy question. You see... the "list" you refer to is not meant to be shared with trainee types like yourself. Once you get your State License, they will mail you the list. In a nutshell, here is what part of the list looks like:

Acreage = $1,000 per acre
Sq. Ft. = $10 per
Bedrooms = $1,500 each
Full Bath = $2,000 each
Garages = $1,000 (per stall)
Fireplaces = $1,500
Decks = $500
Fences = $250
C/Air = $1,000

Forget all that stuff about "market extraction" and "paired sales"... these guys are just trying to make you do extra work to arrive at the same numbers I listed above. It's a trick we all play on trainess. Good Luck.