Adjustments made and methodology in workfile

[who knew]

BTW, Thanks for all your input.

 

[Scott Lanz]

Dear Who Knew: (Sounds like Dr. Suess)

To answer your question, no, I do not have proof for every adjustment in my workfile for every appraisal over the last five years. Almost every adjustment, but not all.

Scott J. Lanz

 

[Fred]

The answer depends on which parts of the question are related to developing and/or reporting.

On the development side, the question is do adjustments require support or can they just be made up in a way that the appraiser can't really explain? (eg, It just "looks" right. My mentor told me to use $30/sf).

On the reporting side the question is does the appraiser have to explain how adjustments were made?

I think the answer to the second question has something to do with reporting option. A restricted use report might not even specifically identify the sales or include a sales grid. Once you get to a report labelled summary, it shoudl contain all information signficant to the solution of the appraisal probolem. Are the how's and why's of the adjustment ssignificant to the solution?

 

[KenRossman]

"Proof" and other fairy tales.

The ability to always be able to adjust to a tight, tidy range is largely a myth, just like the highly flawed paired sales technique.

Both essentially assume a market efficiency that just doesn't exist in the real world. It is virtually impossible most of the time to find pairs that are truly identical except for one component. There is almost always contamination with other factors that influence the value. Stated differently it assumes that all market participants view all components (to value) equally with similar expectations and motivations that also rarely exist. People buy what they buy for many different reasons (motivations). Many times they buy in spite of a feature that has no particular value or use to them. Almost All home purchases involve some degree of settling for a multitude of factors that often can't be quantified

I personally try to find sales that have as high degree of similarity to the subject as possible and keep highly subjective adjustments to a minimum. I spent many years as Realtor (before and during the early years of my appraisal practice) and nothing has been more useful to me than observing market participants reaction and their desire to pay for or not pay for different factors/items...

I spend quite a bit of time on every assignment talking to the homeowners or prospective purchasers and probing them about their likes, dislikes and desires. I always inquire about the cost of recent improvements and significant amenities. I ask if different features influenced their decision to buy. I have many Realtor friends whom I frequently use as a sounding board when I come across something atypical.

So no, I don't always have "proof" in my file for every adjustment made.

 

[Pamela Crowley (Florida)]

Your grid is your 'paired sales analysis'. Your grids from all you other appraisals over your years of appraising are also your 'paired sales analysis'.

 

[Tom McDowell]

This link may be of some assistance if your issue is one about a view.

http://207.208.196.137/webpac-bin/pdf/UndevelopedPropValues.pdf

I hope it helps a little.

 

[Michigan CG]

How many adjustments are in our heads....because we learned it from a previous assignment....demo cost $4.25/SF...basement area $20/SF.....golf course view $10,000 (this is Iowa ya know).......

 

[stefan olafson]

When completing narrative reports it's a requirement of USPAP to properly complete the cost, income, and sales comparison approach. The state in which I live and formerly was licensed has decided there are two levels of USPAP compliance (at least), Those with a CG license doing narrative work have to show matched pairs in the SC approach, have to show comparable rentals and provide analysis and summation (more than a page and a half) showing how one has arrived at a value for the comparable rent. Have to show why adjustments to the income stream were completed. In the Cost Approach they must provide comparable sales data and analyze and summarize why the value of the site is what you state, then they require you analyze and summarize Entrepreneurial Profit.

In completing a residential appraisal, it depends on who does the review? One reviewer does not require a complete description of the neighborhood down to days on market for typical sales, population and demographic data for the neighborhood and # of sales and listings in the neighborhood, but another does. A reviewer (expert from out of state) may require explanation of each adjustment, others don't.

It depends on who is reading the appraisal report and what their educational background and background in the business comes from.

Not a simple answer. I place a sheet in each workfile informing the reviewer that all information not in the file is in files and computers in my office. Never had one request anything though!

 

[Pat Butler]

The fact is, USPAP doesn't go into detail when it talks about the need to have a work file that 'supports' the appraisal. Like typical, we're left guessing as to how much data is needed to satisfy that requirement. I think the majority of appraisers (your peers) do not have support for individual adjustments.

 

[Fred]

I personally try to find sales that have as high degree of similarity to the subject as possible and keep highly subjective adjustments to a minimum

Ken,
I am not disagreeing with anything in your post, but sometimes I just see unrecoginzed assumptions. One would need to know how much those same "subjective adjustments" are and for what critieria, before saying you weeded out the three that require the least.

When completing narrative reports it's a requirement of USPAP

Stefan, where does USPAP distinguish one report from another based on which is "narrative?"