Conditional/quality Adjustments

[residentialguy]

Different appraisers can see it differently, but the appraisers when using UAD ratings are supposed to "see it", or call it, by what the UAD says for each category as much as possible. Otherwise what is the point of having them...

Totally agree...and appraisers can be wrong. However, upgrading can change the quality rating.
What's the point of having them? That's easy...so they can steal the appraisers data and use it against them as well as sell it.

 

[Overimprovement]

I simply don't have this rigid view that a house is ONLY and EVER a Q4 or a Q5. Ratings are a continuous scale, not discrete buckets like # of stories.

Let's cut to the chase--can an appraiser have a adjustment for the same OVERALL quality rating? I emphasized OVERALL because its important. Unfortunately, there is NO granularity with Q and C grades. They are whole numbers. But that does not mean equal. The White House is a two story house. Is it equal to the two story home around the corner? Of course not.

If one thinks you can have adjustments for the same Q rating, then why? Because in your mind you are saying a Quality 2.51 is not the same as a Quality 3.49. Remember rounding from school? These both ROUND to Q3, but they are a FULL rating level different.

If one thinks you cannot have adjustments, then what do you do with all the differences that lead to such different quality grades? Breaking them out to a separate line on a grid seems a waste, when there is already a line devoted to quality. Its like adjusting for view, but putting a separate line at the bottom that says 'partial meadow and hills view'?

As long as an appraiser actually comments on why the adjustment is being made, I know of no lender or AMC that will kick it back. If they do, and refuse to allow it, I will not work for that lender again.

 

[J Grant]

Totally agree...and appraisers can be wrong. However, upgrading can change the quality rating.
What's the point of having them? That's easy...so they can steal the appraisers data and use it against them as well as sell it.

Lol... it's awful they use UAD to then give appraisal waivers and such ...but UAD also serves a purpose and makes " them " need appraisals , to keep feeding the UAD machine ! And to keep track of properties.

To be fair, it gives lenders and investors objective , uniform categories for what they are lending on, and a way for a reader to see if an appraisal is "off" or not...the photos for one, should correlate with the Q and C ratings, and then the cost approach. should as well. Hello, Appraiser says it is a C2, but cost approach $100 a sf to build? Or a C 4 cost approach $200 to build?

There can be a gray area but imo , overall adding upgrades makes whatever Q rating a house has upgraded or even remodeled, but rarely would it change the Q rating because the Q ratings are more than just quality of materials, they specifically address certain design elements. It can also support when a super high level of upgrades does not recover value, aka becomes a super adequacy relative to the Q rating.

Adding a 100k designer kitchen with Wolfe range will not make a Q4 home a Q 2, while buyers may love the kitchen, they are only willing or capable of paying so much in that tract price range, thus for a C 4 home that kitchen upgrade is a super adequacy. In a Q 2 home a 100k kitchen is typical and market expected and has no loss in value or adds value. So there are reasons for the UAD ratings that actually make sense...much as I hate to admit it.

 

[residentialguy]

They don't need some obscure rating to see what the quality and condition is . The photos and comments do that better than the silly ratings.
They want the ratings to score and spank other appraisers and to sell the info for AVMs, etc. Of course, let's not forget their own use for appraisals that don't need an appraiser because they already have appraiser data.

 

[J Grant]

For reference:

Q2
Dwellings with this quality rating are often custom designed for construction on an individual property owner’s site. However, dwellings in
this quality grade are also found in high-quality tract developments featuring residence constructed from individual plans or from highly
modified or upgraded plans. The design features detailed, high quality exterior ornamentation, high-quality interior refinements, and detail. The
workmanship, materials, and finishes throughout the dwelling are generally of high or very high quality.
UAD Version 9/2011 (Updated 1/2014)

Q3
Dwellings with this quality rating are residences of higher quality built from individual or readily available designer plans in above-standard
residential tract developments or on an individual property owner’s site. The design includes significant exterior ornamentation and interiors
that are well finished. The workmanship exceeds acceptable standards and many materials and finishes throughout the dwelling have been
upgraded from “stock” standards.
Q4
Dwellings with this quality rating meet or exceed the requirements of applicable building codes. Standard or modified standard building plans
are utilized and the design includes adequate fenestration and some exterior ornamentation and interior refinements. Materials, workmanship,
finish, and equipment are of stock or builder grade and may feature some upgrades.
Q5
Dwellings with this quality rating feature economy of construction and basic functionality as main considerations. Such dwellings feature a
plain design using readily available or basic floor plans featuring minimal fenestration and basic finishes with minimal exterior ornamentation
and limited interior detail. These dwellings meet minimum building codes and are constructed with inexpensive, stock materials
with limited refinements and upgrades.

 

[J Grant]

I simply don't have this rigid view that a house is ONLY and EVER a Q4 or a Q5. Ratings are a continuous scale, not discrete buckets like # of stories.

Let's cut to the chase--can an appraiser have a adjustment for the same OVERALL quality rating? I emphasized OVERALL because its important. Unfortunately, there is NO granularity with Q and C grades. They are whole numbers. But that does not mean equal. The White House is a two story house. Is it equal to the two story home around the corner? Of course not.

If one thinks you can have adjustments for the same Q rating, then why? Because in your mind you are saying a Quality 2.51 is not the same as a Quality 3.49. Remember rounding from school? These both ROUND to Q3, but they are a FULL rating level different.

If one thinks you cannot have adjustments, then what do you do with all the differences that lead to such different quality grades? Breaking them out to a separate line on a grid seems a waste, when there is already a line devoted to quality. Its like adjusting for view, but putting a separate line at the bottom that says 'partial meadow and hills view'?

As long as an appraiser actually comments on why the adjustment is being made, I know of no lender or AMC that will kick it back. If they do, and refuse to allow it, I will not work for that lender again.

Yes, within the SAME Q rating, an appraiser can make adjustments for variances within the Q rating.....either on the Q rating line, or on a separate line with the reason roken out ( new roof, or superior, for example)

But that is another issue than at one point does one differentiate between Q ratings ( at what point is a house a Q 3 or a Q 4), and then whether adding enough upgrades to a Q4 house will make it into a Q 3. for that I look back to the UAD definitions themselves, which are about more than just the quality of the materials or upgrades, they also address design and tract level or custom etc.

I understand Fannie is updating or changing the forms the same with UAD ratings...I personally think the rating categories are pretty good, all they need to do is make a plus, minus or equal sign, or Q3 avg, Q3 sup, Q3 inf...( relative to subject)

But to me it is not that big a deal, just make your adjustment and explain why it was made and what support there is in the market for it.

 

[J Grant]

If one thinks you can have adjustments for the same Q rating, then why? Because in your mind you are saying a Quality 2.51 is not the same as a Quality 3.49. Remember rounding from school? These both ROUND to Q3, but they are a FULL rating level different.

Not saying that ( or I did not mean to say that). If an appraiser thinks a comp is a Q 2.5, fine, explain and adjust, but it still falls under a Q2 rating. A Q 3.49 in appraiser's mind, again, adjust /explain, but it is still a Q3 rating It's not a math problem where either one is rounded to a Q3, it's a judgement issue that a certain level of design, floor plan, ornamentation and overall quality and similarity or differences from standard/tract housing merits our rating as a Q 2 or Q 3. Then any differences within the ratings are analyzed and possibly adjusted for, or considered in the reconciliation.

 

[J Grant]

Res guy- Totally agree...and appraisers can be wrong. However, upgrading can change the quality rating.

The second part is where we disagree...imo, exceptions aside, even extensive upgrades will not change the Q rating. Because the Q rating break offs are not just about quality materials, they also relate the quality to the entire design and floor plan and build of house, relative to tract or custom.

A highly upgraded or remodeled Q 3 can add value of course and it should be adjusted for, but it still won't, in most cases, change that a Q 3 house to a Q 2, because a Q2 house per the UAD definitions is from original build more custom, more ornate and detailed architecture etc.

I do a fair amount of high end properties and some of them are extensively upgraded or remodeled, Though it can add a lot to value, it still rarely changes the Q rating,

It would be Q3, remodeled vs Q3 not remodeled, not Q3 vs Q2 if the only difference among otherwise equivalent design /architecture was a subsequent remodeling (or upgrading) .

 

[RCA]

Res guy- Totally agree...and appraisers can be wrong. However, upgrading can change the quality rating.

The second part is where we disagree...imo, exceptions aside, even extensive upgrades will not change the Q rating. Because the Q rating break offs are not just about quality materials, they also relate the quality to the entire design and floor plan and build of house, relative to tract or custom.

A highly upgraded or remodeled Q 3 can add value of course and it should be adjusted for, but it still won't, in most cases, change that a Q 3 house to a Q 2, because a Q2 house per the UAD definitions is from original build more custom, more ornate and detailed architecture etc.

I do a fair amount of high end properties and some of them are extensively upgraded or remodeled, Though it can add a lot to value, it still rarely changes the Q rating,

It would be Q3, remodeled vs Q3 not remodeled, not Q3 vs Q2 if the only difference among otherwise equivalent design /architecture was a subsequent remodeling (or upgrading) .

I shouldn't say much. But Fannie Mae certainly saddled appraisers with a god awful system for rating condition, quality. I think it is Germanic in origin. I worked in Germany for a number of years, - ages ago. The Germans always had this thing about absolute standards. They find the American "grading on a curve" absolutely horrendous - because it supposedly leads to hateful competition among students, employees or whoever. They want an idealistic society where all the citizens love each other. They tend to be hard workers, anyway 40 hours a week (they tend not to work over time), minus ample holidays, 6-8 weeks vacation/year, unlimited sick leave (which they almost never take).

--- But, anyway it doesn't work for us. It just doesn't work. None of that German stuff works here in the US. There is no absolute standard for condition and quality in homes in too many places - it is all relative. The Sales Comparison Approach is a RELATIVE approach. The Fannie Mae architects had their heads of their wazoo, like they always have and most likely always will. Nobody at the AI knows WTF they are doing either. It's as the saying goes, a FF.

-- So, yea, I would put it in the grid if I had to. But in figuring the adjustments out, I do things my way, percentage better,worse as 0.0-10.0, so 4.5 means 45% of the homes in the market area are in worse condition, quality, appeal and/or or view. Everything very procedural and minimal guess work. A lot of advanced regression, stamped in the end by my subjective opinion of the subject's rank in terms laid out by the model I created.

 

[Overimprovement]

Q3
Dwellings with this quality rating are residences of higher quality built from individual or readily available designer plans in above-standard
residential tract developments or on an individual property owner’s site. The design includes significant exterior ornamentation and interiors
that are well finished. The workmanship exceeds acceptable standards and many materials and finishes throughout the dwelling have been
upgraded from “stock” standards.
.

Part of the problem is the complete lack of absolute standard or examples. We are left to essentially guess what is meant by words (my bold above) such as higher, above-standard, significant, well-finished, upgraded, many, finishes. If the powers that be want absolute ratings, they need to make it very clear what separates.

The other issue is this--what if the interior demonstrates Q3 characteristics, but the exterior merely Q4? What's a poor UAD adhering appraiser to do?