Are you adjusting your comps for AGE?

[Terrel L. Shields]

So how do you derive your Eff. age? Guess? Market based Extraction (i.e.- reverse engineer the cost approach on each comp. I'd bet most appraisers haven't ever done that...) Sensitivity Analysis?

 

[Doug DeMars]

FWIW, I make the following commentary in my addendum. Typically, the "age adjustment" trigger is significant...say a 20 to 30 year variance and I don't think I've made an adjustment for less than a 10 year difference. Of course, ideally I look for comparables that don't have a large age variance...but sometimes you don't have much choice.



Minor consideration is given to "actual age" with respect to the Subject and Comps. Most often, market participants are concerned with the condition of the improvements (as of its respective sale date) regardless of its original construction date. Furthermore, the quality of materials and workmanship play a much greater role of material importance vs. when a house was built. As such, "age adjustments" are not typically applied with overall "quality" and "condition" being more relevant to the valuation analysis. If there is a variance noted on the sales grid, a market reaction (i.e. adjustment) may not be made because the variance is found inconsequential to the overall analysis. A "0" may be placed on the grid to let the reader know the appraiser acknowledges the variance but has determined that an adjustment is not warranted.


Typically, dwellings found with a significant variance in "Actual Age" will reflect a notable difference in market appeal if all other factors are found essentially "similar". In other words, even if "Design, Quality, and Condition" is very similar, a "newer" home may reflect slightly higher market appeal due to its modern fenestration and/or interior design-layout. (This is often found in large "tract" style developments) As such, we have found it appropriate to make a modest XXK adjustment to reflect the market reaction for this consideration for homes found greater than XX years from the subject's age.

 

[Jo Ann Meyer Stratton]

I have never made an adjustment for effective age since I went into fee appraising in 1982. I have made many adjustments for condition and occasionally adjustments for original year of construction. I have always considered that an adjustment for condition and another adjustment for an effective age was double dipping for the same thing. Effective age is just a number pulled from the air. Some times in my area with it's limited data, homes 90 years old have to be compared to one that is only 40-50. The different time periods had different style, design, material, workmanship, etc. Also occasionally the 100 year old house, if it has been restored is more valuable then a new house because of the special appeal and ambience of that time period.

 

[timd354]

Pre-UAD, I use to adjust based on effective age (i.e. 30act/20eff in grid). Since UAD doesn't like this approach, these adjustments are now made in "condition" field, with a big fat ZERO for actual age differences.

I agree with Mile High Trout. Sometimes with relatively younger homes I will apply an age adjustment when comps are in similar condition, but differ in age by 5 years or so.

Adjusting for effective age is ludicrous in a residential appraisal. Adjustments are supposed to be based on market reaction to differences between the subject property and the comps. How can the market react to something that the typical residential buyer or seller has not heard of, does not think about when buying or selling a home or even understand?

 

[Have Laser-Will Travel]

The age adjustment is usually taken care of in my condition and design adjustments. Otherwise, if I am doing a condo, sometimes in my area there is a strong correlation of value with age, then I will apply a % factor to age for an adjustment.

 

[gregb]

Ay ay ay...generally, in my market

No age adjustments were warranted in any of the comparables as the majority of buyers in the market look at the effective age and overall condition of the improvements rather than the actual age.

 

[Restrain]

The answer is: what does the market dictate in each instance. It is that simple...or that complicated.

 

[Mike Garrett RAA]

As usual it is..."it depends". Some times the condition adjustment would be really large if an age adjustment isn't used. Common IN MY MARKET to use $250 ~ $500 a year for age based on actual age not effective age. No adjustment for less than 5 years difference. I never indicate an effective age for comparables because I haven't observed the interior...in most cases.

Brings up a good question. What do you use for a condition adjustment between between C3 and C4? Before UAD I was able to fine tune the condition with things like Above Average or Below Average now I find it necessary to use larger adjustments. A very senior underwriter has suggested not using any condition adjustment when less than $5,000. She also wanted a break down of what was included in the adjustment such as $1,500 for interior paint, $1,500 for interior paint, $2,000 for landscaping, etc. I think this is well beyond my scope of work.

I do notice my reports have fewer adjustments these days as a result of UAD. We were not required to use UAD prior to Jan 1 for VA work so it's still new to me.

 

[JamesRockford]

A very senior underwriter has suggested not using any condition adjustment when less than $5,000. She also wanted a break down of what was included in the adjustment such as $1,500 for interior paint, $1,500 for interior paint, $2,000 for landscaping, etc. I think this is well beyond my scope of work.

The first "suggestion" is a violation of appraiser independance.

Requesting a "breakdown" of what is included in your condition adjustment is absolutely reasonable.

"Well beyond the scope of work?"

You've got be kidding.

 

[Mike Garrett RAA]

So, you are suggesting that I itemize any time I make an adjustment to a comp? Sounds more like I would not be summarizing. I can understand listing repair items for the subject if the appraisal is subject to.