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Adjustments made for date of sale of a sale!

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Mari Heyden

Freshman Member
Joined
Feb 27, 2003
I had a lousy teacher and have now gotten multiple opinions on how to adjust a comparable based on the date of sale.

What I was taught is to take the price of the comparable and multiply it by the inflation rate in the area. I then take this and divide by 12 to get the increase in value per month. I then multiply this by the number of months difference in sale date between the comparable and the subject. This gives me the adjustment for date of sale.

I recently had a appraisal questioned because of this and the fact that 2 of the comparables were over 1 year old.

Do you and how do you adjust for the diference in sale date between the subject and the comparable?

Also, are apprisers starting to use sales up to 2 years old when needed?

I need some help!

Thanks,

Mari
 

Ted Martin

Senior Member
Joined
Jan 17, 2002
Professional Status
Certified General Appraiser
State
Kansas
Unless you are working at the end of the earth, on a really wierd property, a year is probably a good limit on transaction time frame. Saying that I just did a job in a county that has a population of 6,000 in a small town that has fewer than 200 people and researched back two years although all of the sales I used in the report were from the last year.

Where are you getting the inflation rate from? Are you sure that you market is inflating and not deflating? In my market a time adjustment for a period of less than one year is generally statistically unsupportable with any reasonable degree of confidence because of the small size of the data pool and because of the much larger impact that other more subjective factors can have on value, such as condition and quality.
 
Joined
Jan 13, 2002
Professional Status
Retired Appraiser
State
Florida
The published overall inflation rate of homes in an urban area is very misleading!!!!

I see individual subdivisions where that rate is somewhat close, others where that rate is absolutely absurdly high.
IF there is ANY time adjustment applicable, you need to support it with YOUR OWN statistical data drawn from that particular subdivision/market area.

I'm so sorry that you trained with a number hitter, but you do need to go back and read, read, read your books and USPAP. Do yourself a huge favor and either black out or hide until your finished the value wanted when you get the order.

I'd like to hang your mentor.
 

Randy Beigh

Senior Member
Joined
Jan 16, 2002
Mari

That is quite a mathematical formula and certainly takes time. However, it is probably not much different than other formulas that start off with faulty precepts. The inflation rate in your case is the most important part of this formula. If that information is wrong, so is the rest of the formula.

Having said that, a lot of appraisers rely on formulas that they believe and even have the ability to prove. Most have some type of guesstimate built into them. The most common of these at the present time is paired sales formulas.

To have any believability in the formula, you have to believe in it and it doesn't sound like you do. It sounds like you are putting in time adjustments without full knowledge. If I were you, I would back up a bit and study your market. If values are increasing, are they increasing at the rate you are saying in the report? If not, then you need to adjust, either the formula, or find a better way.

I have reviewed 1,000's of appraisals throughout the country and some formulas are a little unbelievable. But, for the most part, it doesn't matter. As long as the appraiser is consistant and not to wild with the adjustments, the formula used is to make the appraiser more comfortable with what he is doing.

I am not going to jump on the bandwagon and say your mentor was a bad appraiser or trainer. The formula he used is probably not much worse than most others.

Your last question about using older sales is different. I have often said, about the only you can't do in appraising is make things up. Of course, you can use sales that are 2 years old or older, if that is all there is. In fact, there are cases where it is necessary and that will depend on the market and the type of home. You just need to expalin what you are doing and why you are doing it.

Hope this helps
 
K

Kevin Shannon

Guest
I must be missing something, where does it say that her mentor was a "number hitter"?

Maybe just a bad mentor.

Kevin
 

Roger

Junior Member
Joined
Jan 24, 2002
Professional Status
Certified General Appraiser
State
Missouri
It's always seemed to me that, if the most recent sales are over one year old, It must be a very slow sales market.

Very difficult to determine or support any time adjustments in a market that is that slow.
 
Joined
Jan 13, 2002
Professional Status
Retired Appraiser
State
Florida
Mari,

Randy gave you excellent advise as opposed to my seeing red so quickly.

Take a good look at active & pending listings, days on market prior to the sale for recent sales, sales 6 months ago, sales 1 year ago, sales 18 months ago, sales 2 years ago. Truly, ignore the value wanted and take a good look at what's happening in the subject's immediate neighborhood now and previously.

Remember that UWs have access to comps data bases and will check your information and see if other recent sales would have been available. Just do each and every report so it's ready to be reviewed. Sometimes it helps to print it out and read through it as if you just received it to do a review on. If there are items that would make you question if it's correct, the UW will question it. How would you answer if someone said "Prove It"?

Good luck!
 
Joined
Jan 13, 2002
Professional Status
Retired Appraiser
State
Florida
OK Kevin Shannon, come on to the Orlando Forum Meeting. I challenge you to arm wrestling!

:lol:
 
K

Kevin Shannon

Guest
Mari,

Randy and Pam have given you some very good advice.
I hope you use it.

Kevin
 

Bill_FL

Senior Member
Joined
Aug 23, 2002
Professional Status
Certified General Appraiser
State
Florida
Can someone page Austin? :wink:

really, the best way to do it is to look for resales. Look for similar properties that have resold. Verify and major changes to the property. If none, the price difference is the time adjustment for that time frame.
 
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