How Do You Arrive At Bath Or Bedroom Adjustments?

[ucbruin]

I might include a couple of matched pairs, and see that the value difference ranges between $3,000 and $12,000.
What is my conclusion?
I might conclude that a pool in that neighborhood contributes value (the historical trend). I have data that shows in two examples, a pool can be shown to contribute $3k or $12k. The rest is just picking the point. Maybe $5k fits best within the rest of my assignment's analysis. Maybe $10k, maybe $12k, or maybe even $15k. Once I've concluded that an element warrants an adjustment, and once I have data that gives me a range of where that adjustment falls, I've solved that problem. I just need to pick the adjustment amount and move along.

I think Homesweethome hits it on the head, too, Denis. "I try to be reasonable".

Same appraiser. Doing appraisal on a 500,000 house with fireplace. Makes $5,000 adjustment for the fireplace. Doing appraisal on 100,000 house with fireplace. Makes $5,000 adjustment for fireplace. Really? A fireplace is 5% of the total value of the house? That just doesn't make sense. And the value of a fireplace in a higher end home is equal to the fireplace in a low end home? That doesn't make sense. This is what I'm talking about.

It's the same as saying all GLA adjustments are $25sf no matter the age, condition, quality. Doesn't make sense.

"Reasonable".....
I agree with the 3 of you....

As Denis points out, in the real world, it's a "range" of values. The dollar amount one decides to employ is probably based as much on the appraiser's mood that day as it is based on the accuracy of the matched pairs for the subject property. Sort of like a teacher reading 100 essay and then placing a grade on each an every one of them. That is an art rather than a science. The "F" and "A" grades are probably obvious, but maybe not so obvious are the other grades.

I understand your "fireplace" adjustment was for example purposes. And I'm sure you've read many a comment from different appraisers regarding the ______ appraiser (you fill in the derogatory term) who makes an adjustment for a fireplace.

My point....
I like to believe every appraiser employs a "reasonableness" factor when deciding when to make an adjustment and how much of an adjustment to make.

 

[J Grant]

The "most probable" price from market value opinion applies in determining "reasonable" adjustments as well. If pools range from per extraction/paired sales etc, a low of 8k contributory value to a high of 20k, and it;s a 300k house, what is a reasonable pool adjustment? What do most buyers pay (most probable ) vs an outlier buyer on either the cheap or extravagant end. What does a pool cost new in a 300k house? Maybe 30k? A pool in a 800k house new may cost 50-60k, because the expectation is a higher quality or more unique with waterfall, spa etc.

The adjustment should reflect a relationship proportionate to quality, cost, price of home, and then how popular/in demand that amenity is . Oddball amenities that few buyers want and few owners add ( the two are aligned), can be an over improvement or out of trend demand no matter what it costs. Checking with RE agents helps especially if new to a property type or area.

Builders offer the recent new materials and popular trends for upgrades and options for homes of whatever type and price range they are building. .

 

[bnmappraisal]

I like to believe every appraiser employs a "reasonableness" factor when deciding when to make an adjustment and how much of an adjustment to make.

I'll agree with that UC. However, I'd just add that the explanation needs to be there, too, in part, regarding the "reasonableness" of whichever adjustment. I don't always explain each adjustment on my grid; I'll admit that, but the ones these are usually "common sense" adjustments (i.e. pool vs no pool maybe?) But I do (try to) explain the adjustments that may not be so obvious (i.e. view, location)

 

[ucbruin]

The "most probable" price from market value opinion applies in determining "reasonable" adjustments as well. If pools range from per extraction/paired sales etc, a low of 8k contributory value to a high of 20k, and it;s a 300k house, what is a reasonable pool adjustment? What do most buyers pay (most probable ) vs an outlier buyer on either the cheap or extravagant end. What does a pool cost new in a 300k house? Maybe 30k? A pool in a 800k house new may cost 50-60k, because the expectation is a higher quality or more unique with waterfall, spa etc..

Maybe in FL of SoCal but that's not necessarily the case in MA.
But, as has often been pointed out...cost does not necessarily equate value.....

Overall I get your point...

The adjustment amounts will most likely vary depending on neighborhood prices.
And I'm sure that most appraisers will not just assume this to be the case....

 

[J Grant]

I did not mean that the cost is carried over as the exact value for the adjustment, rather that the value should usually have a proportionate relationship to cost.

A 30k cost pool might have a 15k adjustment on a 350k house..., for example, would that make sense on a pool that cost 60k on a more expensive house costing 850k? That might see a pool adjustment of 30-40k. (these are just examples. )

Typically a more expensive to build amenity on a higher price property results in a larger adjustment ( assuming the market shows it). If market is not returning more $ in price for a more expensive cost pool, that can indicate an over improvement, or super adequacy ..such as when owner of a 350k house owner puts in a 60k pool and expects to get it back in price...