Condition adjustments: what are we really adjusting for?

[Hoosier Country]

Specifically referring to a C2, completely remodeled/never been lived in since renovation house, comparing to a C1.

I am making an age adjustment because the framing components and foundation have wear on them. But when it comes to the condition adjustments, I'm thinking there really shouldn't be one IN ADDITION TO THE AGE ADJUSTMENT, for C1 vs C2 in this case.

What am I not considering?

Thanks.

 

[J Grant]

Specifically referring to a C2, completely remodeled/never been lived in since renovation house, comparing to a C1.

I am making an age adjustment because the framing components and foundation have wear on them. But when it comes to the condition adjustments, I'm thinking there really shouldn't be one IN ADDITION TO THE AGE ADJUSTMENT, for C1 vs C2 in this case.

What am I not considering?

Thanks.

You may be right - whatever your market shows is the right answer - run some sales , stick them on the grid, adjust for all other factors, and if the prices are not showing a measurable adjustment for condition, then put a zero on that line, and explain why.

 

[Dublin ohio]

Specifically referring to a C2, completely remodeled/never been lived in since renovation house, comparing to a C1.

I am making an age adjustment because the framing components and foundation have wear on them

So are you talking about the difference between a C1 new construction and a C2 that was built in 1980 but completely rehabbed "down to the studs". I can only think of a few situations where I would be comparing a new build to an older renovated home.

 

[Mark K]

I tend to agree but, in this area, total rehab 30 yr. old vs. new, other things similar, will still sell for 20-25% less than new so I think you'd be looking at a large age adjustment to reflect the buyers' preferences. YMMV.

Personally I'd rather have the 30 yr. old rehab over the new crap they're building today. Not to mention that the older home usually has a larger lot, the landscaping is complete, etc.

 

[Tom D]

Specifically referring to a C2, completely remodeled/never been lived in since renovation house, comparing to a C1.

I am making an age adjustment because the framing components and foundation have wear on them. But when it comes to the condition adjustments, I'm thinking there really shouldn't be one IN ADDITION TO THE AGE ADJUSTMENT, for C1 vs C2 in this case.

from my experience with a friendly reviewer. they figured out the CU expects a condition adjustment on a c2 verses a c1. i am old big urban city so the left outside original bricks looks the same as the other homes. and buyers don't see the old behind the new interior, or care here. i never do age adjustments, my comment below comes from an urban view. this comment covers several different conditions, take out what doesn't apply, adjust it to your areas or comps.

Condition differences, if any, are based on MLS photos and comments when available. There is no measurable market evidence to determine what effect, if any, the age difference has on value after being 20 years old in the area. Most buyers take into account the interior condition verses age differences in an older area. Comp's condition c2 verses c3 adjustment based on Straight line depreciation, understanding that depreciation isn't a straight line, normally small at first and accelerating with age. Subject is a newer dwelling when physical depreciation may not be noticeable with a low effective age. Included in that adjustment is a Premium: There is usually a premium for new/rehabd construction/condition. Just as buyers pay more for that new car smell, buyers will typically pay more for a home that has never/not been lived in. The adjustment for c2 verses c1 includes that 'premium'.

 

[Artemis Fowl]

A condition adjustment should be accounting for physical depreciation. An age adjustment may or may not contemplate physical depreciation but likely will...depends on the ability to isolate it from the data you have. Collinearity can be a concern for these two. To put more simplerer...the contributory values of each variable get mixed up. Are physical issues hiding within an age adjustment and vice-versa. Comp selection can reduce these issues when similar ages are used. IMO I would try to avoid the issue by using more similar comps (cause that's always an option in the real world /sarc) or not adjusting for age unless I was pretty confident that I can extract something relevant to only age.

 

[Surf Cat]

A condition adjustment should be accounting for physical depreciation. An age adjustment may or may not contemplate physical depreciation but likely will...depends on the ability to isolate it from the data you have. Collinearity can be a concern for these two. To put more simplerer...the contributory values of each variable get mixed up. Are physical issues hiding within an age adjustment and vice-versa. Comp selection can reduce these issues when similar ages are used. IMO I would try to avoid the issue by using more similar comps (cause that's always an option in the real world) or not adjusting for age unless I was pretty confident that I can extract something relevant to only age.

^^^^^The bolded...even if you have to go further back in time. 18 - 24 months at least. You need more data....

 

[sputnam]

As always, you are adjusting for the market reaction to differences between the subject and comparables. A 100 year old house that has been renovated and has an effective age of 20 is not the same as a 20 year old house.

 

[Terrel L. Shields]

A 100 year old house that has been renovated and has an effective age of 20 is not the same as a 20 year old house.

Depends upon the RCN and REL.

 

[sputnam]

Depends upon the RCN and REL.

Actually, it doesn't. The two dwellings aren't the same. The question is whether there is a market reaction to the difference between a renovated 100 year old house and a 20 year old house.