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Double Grid Adjustments !

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David Riggs

Sophomore Member
Joined
Apr 12, 2002
Yesterday (yes Sunday!) I was filling out the URAR sales grid and I made an adjustment for SF (average 70/sf across all three comps, I adjusted 50% @ 35/sf) then I also adjusted for 2 bedroom vs. 1 bedroom. Subject was 1120sf comp #1 850sf

Did I adjust twice for the same thing? (once for the comp being smaller in sf than the subject and then again for a 1bed vs. 2)

W hat would you do?

Ps..no other comps were available
 

Jeff Horton

Senior Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
Alabama
That would depend on your market and how buyers would look at it. In my market with that small a house and assuming it is priced in the lower end of the market then possibly. I would have to look close at the data available.

I don't see how anyone can really answer that with out some market research. Otherwise it's just an opinion.
 

aprazer

Junior Member
Joined
Feb 27, 2002
Professional Status
Certified Residential Appraiser
State
New York
I would say you are not adjusting twice for the same thing. You adjusted for size and utility-which are two separate issues. I would think in any market there is a limited or diminished appeal in a one bedroom home. This can be adjusted in the room count, or as functional utility adjustment.

You did the right thing.
 

Restrain

Elite Member
Joined
Jan 22, 2002
Professional Status
Certified General Appraiser
State
Florida
Let's discuss this with hypotheticals. Say an analysis of the market shows for homes of a similar size a 10% differential for bedroom differences. You make this adjustment first, before adjusting for size. After adjusting for everything else, you should be able to extract the square footage adjustment differential by using paired sales of the comparables.

That way, by leaving the square footage adjustment to last, you are not adjusting twice for the same thing. That being said, on a small home, there may not be a bedroom adjustment. Depends on the market.

Hope this helps.


Roger
 

Mike Garrett RAA

Elite Member
Gold Supporting Member
Joined
Jan 14, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
Adjusting for functional utility is not the same thing as adjusting for bedroom count and then square footage too. I still say doing both is double dipping. How about the house that was a three bedroom but then converted into two bedrooms. It has the exact same square footage as the three bedroom home. Do you adjust? Maybe...but most likely not. How about the four bedroom home that is exactly the same size as a three bedroom home? I choose to adjust for square footage and leave the bed count alone. Now if it poses a functional problem adjust it under functional utility. I know, not everyone is going to agree with me on this one but...it's market perception of value and my market has indicated square footage to be more important than room count.
 

Tim Hicks (Texas)

Elite Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
Texas
So, Mike, you are saying a person shopping for three bedroom house will look at a two bedroom home? Is that why underwriters want at least two comparable sales with only two bedrooms when your subject is a two bedroom home? :huh: It must be a Colorado thing. Usually when we have older homes with only two bedrooms, we have comparable sales with only two bedrooms in the neighborhood for comparison.

Actually, I find that when a person builds a new two bedroom home it is automatically obsolete, because you can find very few newer two bedroom homes. If it wasn't a problem, then wouldn't there be more builders building two bedroom homes.

However, the differernce between a three and a four bedroom home is less distinct. Some would prefer a study or family room or extra dining over a fourth bedroom for the same size home. Mainly because you are discussing larger homes.
 

David Riggs

Sophomore Member
Joined
Apr 12, 2002
Wow,

Simple question, not so simple answer. However I think I get the idea your trying to get at and I see both view points.

Thanks All!
:p
 

Mike Garrett RAA

Elite Member
Gold Supporting Member
Joined
Jan 14, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
Yes Tim...it is a local thing. My new home is a two bedroom but it could be a three bedroom. Instead of a 3rd bedroom it had a den/dining room option. Our builders are building lots of two bedroom homes. Absolutely no difference in value between this one and a three bedroom. Why? Aging of the population in this market. Lots of empty nesters. We are also a military retirement area. I would challenge you to prove any appreciable difference.

Same holds true for older (1950s) ranch style homes. These are all 850 or 950 square feet. No appreciable differences in value between the ones that have had the three bedrooms converted to two bedrooms. Very popular with the older folks because the rooms are larger.

You are very right about 3 bedroom vs 4 bedroom or 4 bedroom vs 5 bedroom. For that reason it is better to adjust for square footage and let the chips fall where they may. The secret to avoid underwriter problems is to explain, explain, explain before they have to ask.
 

Tim Hicks (Texas)

Elite Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
Texas
That is the difference, Mike. You say there are plenty of two bedroom home sales to prove no adjustment. What about the neighborhoods that have no two bedroom home sales?

I once did a relocation appraisal in a very exclusive neighborhood with security gates, country club, etc. The home next door was owned by the "speaker of the house" Jim Wright. However, the home was 4,000 SF but only two bedrooms. It eventually sold for $100,000 less than the list price, $50,000 less than I thought it was worth and took almost a year to sell. I loved that home. The selling agent said the two bedroom utility killed all the activity on the home. I was wrong about how much it was worth, the agent was wrong (she thought I was an idiot for being lower than her) and the home owner was furious, then confused, then panic stricken trying to sell their home. They swore they would never buy another two bedroom home no matter how much they loved it.

The answer to the original question, it always depends on the neighborhood.
 
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