Conditional/quality Adjustments

[ucbruin]

I am in no way advocating a "book of adjustments". I always saw that as blind adjustment application. Experience does matter but foolish to assume what is relevant to one appraisal problem automatically has relevance to another. Bert can probly demonstrate that mathmatically better than I can explain it.

While you don't advocate the "Book"....
Your posts seem to....
Which is the real world....

 

[Artemis Fowl]

While you don't advocate the "Book"....
Your posts seem to....
Which is the real world....

If that's a question, my answer is...understanding the difference.

 

[J Grant]

" The book" in literal terms is a list of adjustments some mentors used to give trainees. However, " the book , in working terms, is more like a store of knowledge appraisers build up over the years from developing adjustments and analyzing sales for what buyers are paying for positive features and penalizing properties for negative features. An appraiser realizes it can change from assignment to assignment, but if forms a base of knowledge, and that base also has a correlation to the cost approach and depreciation.

 

[Sid Holderly]

I like J Grant's answer. You build your own book on your data with fields that float over rages from $0 to Cost. Some items might be worth more than the cost? Most adjustments, if any are used, are marginal meaning some portion of cost or buyers perception which can cover the gamut. Based on your data & research you deem what marginal adjustment is appropriate. ie $0 or $8,000 Then try to explain to minimize the reviewers' stips.

 

[J Grant]

I like J Grant's answer. You build your own book on your data with fields that float over rages from $0 to Cost. Some items might be worth more than the cost? Most adjustments, if any are used, are marginal meaning some portion of cost or buyers perception which can cover the gamut. Based on your data & research you deem what marginal adjustment is appropriate. ie $0 or $8,000 Then try to explain to minimize the reviewers' stips.

Exactly, otherwise experience means nothing and we would be like idiot savants, starting each assignment with zero accumulated knowledge. Just explain how you derived your adjustments and if they are market supported, it shows it right there in the grid. Those who claim the adjustments are "only" based on 3-4 comps don't get it, those comps were selected after reviewing perhaps 10 other possible comps, and being in the market every day keeps information about trends fresh.

If you appraised similar house a month ago in the subdivision, and 3 during the year in subdivision, do you have to work from scratch the $ per sf adjustment? No, just check to make sure it is relevant to the subject property and any market changes.

But if you are not in the market every day, or a commercial appraiser who does a handful of res assignments a year, you might have to get from regression or other research what the adjustment is...the results should be similar , from different methods if they are to be credible, because results should be supported from the relevant recent sales, listings, agent feedback etc, they should not be "dead" results that work on a graph but have little correlation to how market participants are reacting to the specific property and its competition.

That is the advantage of being in the market every day and getting feedback from agents, buyers, sellers and reviewing lots of similar property sales data year in and year out. For an appraiser who is not out in the res market every day, what, other than the math itself, are you checking that chart or graph/regression against? If you call a few RE agents and tell them results you might get feedback, are they realistic, do they reflect what participants are doing? Then using those adjustments on the grid will either work or not...the non adjusted prices don't lie and don't change, and are a check on our work no matter what methods we use. Of course credible results hinges on using the right comps and that presents a challenge for appraisers not familiar with the property.

 

[Terrel L. Shields]

Without supporting documentation (i.e.- "doing" it now) what happens when called on it? You have to go back and make that data fit your premise, even if wrong. Sure, in most cases it won't be "wrong" by much, cannot think of an instance where it would be, but it is still going to have to be done, right? Did you do it? Or, did you go back to the last report there which went back to the last report there which went back to the ..... you get the picture.

I do sensitivity on every report of residential property Age-condition and SF. The only time I don't I explain why. I just finished a property where condition in very old houses is the key driver. SF made zero sense. Large houses sold cheaper than most of the smaller homes, and smaller homes or larger, the driver was condition. Everything between 750 SF and 1800 SF was priced the same according to condition.

Sensitivity on a spreadsheet takes about 3 minutes to do. Paired sales set up right ditto. Do it on Excel, then copy as picture, paste. done. supported in the report, no questions.

 

[TRESinc]

You are absolutely right. Next question, why don't they just make it Quality and Condition (without forcing a strictly defined Qn/Cn response)? If it works for Style, why not for Condition and Quality? It works for view as well. These are all intangibles, or partial intangibles.

we already had that and the majority of reports all stated average, which could mean anything.

 

[Artemis Fowl]

Sometimes you should be happy to see the assessor...this guy was.

Lakefront sells for significantly less than neighboring properties: Site, quality, updates, condition, year built and general appeal similar. I had most every data point available to analyze there is, looked at sales, looked at costs, income was not a factor...couldn't suss out why...wasn't making sense. This appeared to be an outlier on paper.
Walked the property. Steep slope to the lake and I thought to myself, "Jeez if I slip I'm going all the way down..." There it was. All the neighbors had stairs to the water but this one did not. Contribution of that single improvement multiplied utility and greatly exceeded cost. History showed similar influence in past sales. There is no "book of adjustments" for that, will mess with an RA model, and you wouldn't see it from the street. Interestingly...sensitivity analysis will catch it.