Drainage Adjustment?

[MKay Appraising]

Bracketing to support an adjustment is a recommendation, not a requirement. If it isn't possible, just explain. Expanding search parameters "as far and wide as necessary" to bracket something like that is poor appraisal practice unless you have rock solid support for your location and time adjustments, which you seldom will. I would follow Terry's advice and not waste much time trying to compare widely disparate externalities just to have something which didn't need any adjustment since 99.9% of the buyers for that property are going to have the defect corrected and would typically discount their offer by the cost of hiring it done.

Thanks for posting on here! Could you clear this one part up? If you're saying that 99.9% of the buyers for that property are going to have the defect corrected, and that is reflected in the offer, then an adjustment would be required for as-is valuation, right?

 

[Mike Ault]

Thanks for posting on here! Could you clear this one part up? If you're saying that 99.9% of the buyers for that property are going to have the defect corrected, and that is reflected in the offer, then an adjustment would be required for as-is valuation, right?

Absolutely. And my advice would be to follow Terry's guidance for deriving it. You can't just ignore market reaction to defects like that, it has to be reflected in your opinion of value.

 

[MKay Appraising]

Absolutely. And my advice would be to follow Terry's guidance for deriving it. You can't just ignore market reaction to defects like that, it has to be reflected in your opinion of value.

Perfect! One more question on the topic, haha! So, I may be overthinking it, but on the new UAD 3.6, there's a site section and an exterior section. If I had this scenario of water in the crawl space, then I would notate the adverse site feature in the site section AND the water in the crawl space in the exterior section? It makes me think that there are two problems. Like, there is an adverse site condition AND a structural defect. How would you go about this?

 

[Mike Ault]

Perfect! One more question on the topic, haha! So, I may be overthinking it, but on the new UAD 3.6, there's a site section and an exterior section. If I had this scenario of water in the crawl space, then I would notate the adverse site feature in the site section AND the water in the crawl space in the exterior section? It makes me think that there are two problems. Like, there is an adverse site condition AND a structural defect. How would you go about this?

I'm the wrong person to be asking about the new UAD 3.6. I'm currently in denial over the whole issue. Tom D on this thread has actually been test driving it for us, however. Maybe he will chime in and shed some light on that.

 

[Terrel L. Shields]

But those numbers are useless as they would be different on every transaction.

exactly

Any additional deduction is only a dart board adjustment

 

[TerryRohrer]

Any additional deduction is only a dart board adjustment

Much like creating depreciation adjustments from thin air in a mathematically rigorous, wholly fabricated "cost approach" that looks good and has no basis in market value.

 

[Terrel L. Shields]

creating depreciation

depreciation should be estimated from market evidence. All 3 approaches are data dependent.

 

[TerryRohrer]

depreciation should be estimated from market evidence. All 3 approaches are data dependent.

How did you estimate depreciation for the litter tanks or whatever they were that you reported having no comparable sales for? You repeatedly say sales are not necessary for estimating depreciation. What "market evidence" are you referring to? Is the reported actions of buyer and/or sellers active in the market "market evidence"?

I agree the three approaches are data dependent. However, the approaches are not interdependent with one another. And USPAP requires that you report all assumptions you relied on, and I have never seen a proponent of the depreciated cost approach to adjustment creation in the sales comparison approach claim to do...most reply, "I don't make any assumptions" when asked.

 

[J Grant]

I have not done a UAD 3.6 yet. However, the fundamentals of appraising remain the same. UAD is a format for reporting - it asks for more detailed data or more separation of data reported on the first page, which does not mean you have to adjust for each and every piece of data reported on the sales comparison approach.

A one-off repair issue, such as standing water in an otherwise good or average condition house, is different than a run-down, depreciated house where the standing water is only one of a set of items needing repair/replacement.

Usually, when a house is depreciated enough to need signficant repair and /or replacements, the buyer changes from an owner-occupant to a property flipper or investor ( who is willing to tackle run-down houses needing significant repair or upgrades, and expects a discount that allows for a profit ) In additional, the property flippers and investors are usually cash buyers vs the owner occupants who can be cash, or financing.

If the standing water is such that observed structural integrity is at risk, that is another element, and even if the value is AS IS, you can recommend an inspection and state that if the home damage because of the standing water was beyond what was observed, the appraisal results could be different.

 

[Terrel L. Shields]

How did you estimate depreciation for the litter tanks or whatever they were that you reported having no comparable sales for?

age life - how old, what is their anticipated life.