Allowable Net And Gross Adjustments

[Daniel Torbin]

I am an appraisal trainee, and was wondering what the general consensus was for acceptable net and gross adjustments. In my classes, I believe they said to keep gross adj. under 10%, and net under 3-5%. My mentor's number are quite a bit higher, and seem to be a little more realistic, but neither of us are sure what is really acceptable. Any input would be appreciated. Thanks, Dan

 

[Tim Hicks (Texas)]

There are Fanie Mae guidelines and some lenders have specific guidelines. But remember, they are only guidelines. I include sales that exceed guidelines in adjustments all the time because they are closer, in the same market area or more representative of the market than other sales that are only similar if you consider the guidelines as selection criteria. Our job is to render a credible opinion of value with the most similar sales available no matter what the guidelines are. When we let the guidelines influence our thinking, we are restricting our ability to do a credible job. IMO.

The less honest appraiser will fail to make adjustments do stay within guidelines and avoid underwriter checklists. Honest appraisers will make the correct adjustments despite the guidelines.

Not everybody gets to appraise in cookie cutter world which seems to be the only place guidelines are effective.

 

[Em Tee]

Originally posted by Daniel Torbin@Apr 12 2005, 05:15 PM
neither of us are sure what is really acceptable

 

[Daniel Torbin]

Tim,

Thanks for your quick answer. I tend to feel the same way based on my limited experience. Ive already discovered that sometimes finding the appropriate number of comps that will have low adjustments is not always possible. I agree that one should make the adjustments if they are warranted, regardless of what the adjustment percentages are saying. On the other hand, I would also like to avoid having appraisals get kicked back if at all possible. Thanks again, Dan

 

[Mike Garrett RAA]

Fannie Mae guidelines say 15% net, 25% gross...but those are just GUIDELINES. The less the amount and number adjustments the better or more comparable the comparable is.

Remember you can exceed those guidelines provided you give an adequate explanation of why it is necessary to use comps that need larger adjustments. There is no perfect world in appraising and some times we have to throw the "guidelines" out the window.

 

[CANative]

Just wait until you come upon a property requiring adjustments of 150% or more.

 

[Ted Martin]

Just sent one off where the smallest adjustment percentage (line, net, or gross) was 39%. Not much I could do the house was a wreck in a well maintained market.

 

[The Warrior Monk]

Just wait until you come upon a property requiring adjustments of 150% or more.

:lol:

My record is 254% gross adjustments for one of those high-end no-comps-exist oceanfront estates.

 

[Tim Hicks (Texas)]

Originally posted by Daniel Torbin@Apr 12 2005, 08:47 PM
On the other hand, I would also like to avoid having appraisals get kicked back if at all possible. Thanks again, Dan

When an appraiser is making (or not making) adjustments and comp selection based on adjustment guidelines, they are throwing the appraisal process out the window. Make the adjustments, explain the adjustments, move on.

 

[Pamela Crowley (Florida)]

The confusion between USPAP where an appraiser uses the proper appraisal practices and the 'guidelines' forced upon us by some of the 'users' of our appraisals comes in when the appraiser doesn't understand that these are TWO COMPLETELY DIFFERENT THINGS!!!!!

USPAP AND THE PROPER APPRAISAL PRACTICES COMES FIRST!!!

DO YOUR APPRAISAL FIRST USING WHATEVER IT TAKES TO MAKE IT USPAP COMPLIANT AND AS CORRECT AS POSSIBLE.

AFTER IT'S COMPLETE, GO BACK AND LOOK FOR WHERE SOMEBODY ELSES GUIDELINES HAVE BEEN EXCEEDED AND WRITE UP YOUR EXPLANATIONS OF WHAT YOU DID AND WHY THOSE GUIDELINES WERE EXCEEDED.

DO NOT CONFUSE USPAP AND GUIDELINES!!!