Adjustments made but the same quality ratings for all comps

[Kelly S]

I was given a prior appraisal on a property and the 3 closed sales are all Q3, but Comp 1 has a -$150,000 quality adjustment, Comp 2 has a +$50,000 quality adjustment and Comp 3 has no quality adjustment. The description says the adjustments reflect the superior or inferior quality finishes and workmanship. Isn't that the point of having the quality/condition ratings? Am I missing something?

 

[RSW]

Fannie Mae says adjustments can be made even if they have the same rating. Just explain the rational. Just saying inferior or superior is not adequate.

 

[Terrel L. Shields]

The description says the adjustments reflect the superior or inferior quality finishes and workmanship.

I would have to ask them to show their work. It sounds like filler to me. So what do the land value adjustment looks like versus subject size and comp sizes?

 

[The Warrior Monk]

I do this all the time. What do you if you have 9 sales, all of good but different levels of quality, and a 6-level quality rating system with specific criteria?

 

[J Grant]

You were given the report - are you assigned to do a review on it ?

I personally like to most of the time make a separate upgrade adjustment rather than make it between same rating though on occasion I have done it such as Q4 construction is present but one C4 house is wood frame and the other CBS.

It is impossible for any of us to know if these large adjustments make sense or not, the appraiser should have explained the adjustments specifically rather than the generic statement.

 

[NC Appraising]

I do this all the time. What do you if you have 9 sales, all of good but different levels of quality, and a 6-level quality rating system with specific criteria?

The best example that I can give is in a new luxury home community.

All homes are rated as Q3 per the UAD and have a $800k price point. Owners can add $0-$150k in builder upgrades and options. The quality rating does not change.

Where it can get wacky is if the appraiser leaves the PUD and uses a custom built Q2 home because the subject has $150k in upgrades and is a Q3 home. Overall, one can argue that both are equal, but have different quality ratings; therefore no adjustments would be applied.


The same can be said in a Q4 quality development. $200k price point where closed sales can have $0-$60k in upgrades.

 

[J Grant]

The best example that I can give is in a new luxury home community.

All homes are rated as Q3 per the UAD and have a $800k price point. Owners can add $0-$150k in builder upgrades and options. The quality rating does not change.

Where it gets wacky is if the appraiser leaves the PUD and uses a custom built Q2


The same can be said in a Q4 quality development. $200k price point where closed sales can have $0-$60k in upgrades.

The appraiser has the option of adding an upgrade line item in grid and making the adjustment there instead of the Q rating, line, imo doing so is less confusing. Either way we need to explain./comment

 

[The Warrior Monk]

The best example that I can give is in a new luxury home community.

This is market I generally deal with. Half a dozen sales might have quality variances of a few hundred dollars a square foot, but I'm not calling a home that costs around $500/sf a Q6 quality home just to make the grid look pretty!

 

[glenn walker]

I make them on lower line grid and explain differences. Normally only done on high end properties and not jerking around with $10,000 differences on Ozzie and Harriet tract homes over minor differences in upgrades.

 

[TruJa]

FHA requires specific commentary for each quality and condition adjustment made. I know this not just because it is written down in the handbook, but because a nice lady from HUD called me to explain they were auditing FHA reverse mortgages because too many were losing money, and had to explain to me that my reports were deficient because I didn't specifically explain my Q/C adjustments for each comparable. Since then I've adjusted my workflow to make adjustments independently of Q/C ratings and I do a lot more Q&C adjustments independently of the Q/C rating, and have yet to have a revision since. Support it however you think you should... depreciated cost/paired sales/whatever, but describe precisely why you made that $30,000 quality adjustment.