How Many Have Figured Out

[Carlos Danger]

Could you give an example of a recent adjustment you have made?

 

[RCA]

I'm writing a book on this. And to get into the details, it would be better to get into it in detail, - because with this sort of things you can certainly ask a lot of questions.

BTW, I'm long since pretty good at using Microsoft Word for reports. I picked up a lot when I was at CBRE. But MS Word, is kind of messy and instable with respect to certain things like headers and footers. My wife, who works with MS Word for Biotech documentation (many years) would argue otherwise. But, I'm always having to go in and patch up things that disappear or go awry for no reason.

So, I'm getting into Adobe's InDesign. Nice tool, big learning curve. But, I like the Adobe line, have always used Photoshop, Acrobat Pro, After Affects and Premier Pro - and used to use Flash when it was owned by MacroMedia. I have their full suite and am thinking about getting back into Flash, picking up Muse, trying to get somewhere with InCopy. On top of Visual Studio, C#, RabbitMQ, SQL Server, Windows Server 2016, TCP-IP, Angular JS, Angular 2+, Html 5, Bootstrap, DevExpress tools, ... a million other things it seems, --- and somehow get something real done. But I'm semi-retired, ....

 

[DWiley]

statistical analysis is a recognized method of developing an opinion of value.

https://www.appraisalinstitute.org/assets/1/7/N300GR_TOC-OVER.pdf

I think it would be more accurate to say that some types of statistical analysis have been recognized as valid appraisal techniques. It would be improper to say/claim that all types of statistical analysis have been recognized as valid methods for use in appraisal. For example, I could use statistical methods to derive a Gross Bathroom Multiplier (GBM), and I could then use that multiplier to project values based solely on bathroom count - the math behind that might be well established and accepted, but that would not mean that the GBM was an accepted appraisal method.

As I have posted before, my formal education is in math/physics, and I was working at an appraisal firm during my college days. In my Experimental Design class I almost always used real estate data as the basis for my projects, because it was so readily available to me. I have used modeling techniques in appraisal since the early 1980s. So, I am not opposed in any way to the application of statistical analysis. I was just being honest in stating that I did not understand the nature of the OP. Is it a quiz to see if anyone has the math background to accurately describe the methods being used? Or is it the opening salvo to presentation of novel methodology? It was/is not clear to me.

 

[Mark K]

When the appraisal world moves to a laboratory with comps that are truly comparables, where data is reliable and agents don't lie, where the buyers and sellers are equally motivated, where financing isn't 'funny money' and buyers are informed and intelligent about finance, and where you can obtain plenty of comps, then maybe your system will work.

That's not my reality and from my experience and background (elec engineering) I've found that most engineers like to believe that the world is similar to a large, sterile laboratory. Good luck.

 

[Carlos Danger]

I have been toying around with making my building area adjustments on a per square inch basis. It requires precise measurements and so far doesn't add anything of value to the process. I will keep you all informed on my progress.

 

[Meandering]

I think it would be more accurate to say that some types of statistical analysis have been recognized as valid appraisal techniques. It would be improper to say/claim that all types of statistical analysis have been recognized as valid methods for use in appraisal. For example, I could use statistical methods to derive a Gross Bathroom Multiplier (GBM), and I could then use that multiplier to project values based solely on bathroom count - the math behind that might be well established and accepted, but that would not mean that the GBM was an accepted appraisal method.

As I have posted before, my formal education is in math/physics, and I was working at an appraisal firm during my college days. In my Experimental Design class I almost always used real estate data as the basis for my projects, because it was so readily available to me. I have used modeling techniques in appraisal since the early 1980s. So, I am not opposed in any way to the application of statistical analysis. I was just being honest in stating that I did not understand the nature of the OP. Is it a quiz to see if anyone has the math background to accurately describe the methods being used? Or is it the opening salvo to presentation of novel methodology? It was/is not clear to me.

Oh come on.

How can appraisers "modernize"? If we can't look at new novel things?????

Or should appraisers only "modernize" when it makes money for you, and not Bert?

But I agree with you, the opening line and title, makes you wonder what crystal ball we are assumed to both own and consult.

.

.

 

[J Grant]

I do believe that you are in a different market area. In California, in the higher income areas, appraisers are really thrown into situations where they are flying by the seat of their pants, dancing around hundreds of thousands of dollars in adjustments without support, except to say something like, "... based on historical records." If ALL of your uncertainty is reduced to a single score - the appraiser's scoring of the subject, that is actually very nice. That really simplifies things.

Why are my market areas different than yours? People here, average people, earn 6 figure salaries. a couple earning over $200K/year is fairly common. They often have inherited money and/or gift money from parents, often from overseas so that gifts from parents are totally tax free. If they want, they often do, they can spend wads of money on upgrades to their homes. Some homes have, some don't have upgrades. It is not always that evident from the outside. Houses up for sale in affluent neighborhoods are few and far between. Supply/demand. In this market it is often difficult to understand why homes sell for what they do. It may be nothing more than an additional 20 minutes commute each way to San Francisco. It may be the temperature gradient from being next to the ocean as opposed to being 10 minutes inland. It's nearness to hospitals, being in the right school district. On and on. Like I said in a previous post, in our MLS, if you expand the lookups, you have about 5000 features to consider in the MLS database.

My market area does encompass very high end properties and I have appraised them. The beauty of the existing appraisal methodology is it can be applied to all types of properties and price ranges in all kinds of diverse regions and areas, including nationally and internationally. Whether an appraiser has the competence for an individual assignment is another matter. In high $ properties there are more variances and the scale of adjustments is larger. For that reason, typically a lender will order 2 appraisals from 2 appraisers on these properties. Some variance between the appraisals is acceptable but if there is a wide value opinion or other opinion divergence then the appraisals are reviewed and perhaps even a third ordered.

Appraising involves human judgment and human perspective. That is both its strength and its weakness, it is either accepted as a credible model of value or it is not. Appraising property, or appraising anything , is never an exact science, it is supposed to be supportable and credible for how the value equivalence to price (usually market value ) is derived.

In virtually all appraisal, art, jewels, real estate, antiques, horses, boats, historical records of what others have paid for similar/equivalent is the basis for the hypothetical what would they most probably pay for X ( X is the subject)

Imo, AVM's or statistical value models best serve as a check and balance to an appraisal, rather than a substitute for an appraisal. I understand lenders already do that, as does Fannie Mae.

 

[Terrel L. Shields]

If they need a value +/-20% they can probably get by with an AVM, - and that is assuming that the home is not at the extremes of quality, low or high. AVMs are

Most AVMs that are a magnitude off undervalue, or misvalue, the land, which is fundamental to the value of any rural property and very important to the value of suburban and urban property as well.

And once a sale, an AVM like Zillow will simply match that and in rural areas this may impact nearby sales. I saw one next to a poultry farm. The Farm sold north of $1,000,000 so the AVM had the value at some $700,000....when it clearly would not bring $100,000 on the best day of ts life.

 

[J Grant]

Why are my market areas different than yours? People here, average people, earn 6 figure salaries. a couple earning over $200K/year is fairly common. They often have inherited money and/or gift money from parents, often from overseas so that gifts from parents are totally tax free. If they want, they often do, they can spend wads of money on upgrades to their homes. Some homes have, some don't have upgrades. It is not always that evident from the outside. Houses up for sale in affluent neighborhoods are few and far between. Supply/demand. In this market it is often difficult to understand why homes sell for what they do. It may be nothing more than an additional 20 minutes commute each way to San Francisco. It may be the temperature gradient from being next to the ocean as opposed to being 10 minutes inland. It's nearness to hospitals, being in the right school district. On and on. Like I said in a previous post, in our MLS, if you expand the lookups, you have about 5000 features to consider in the MLS database.

We have areas of high value properties here multi million dollar properties...often near water/beach or in ritzy areas ( Palm Beach Island ). Upgrades...some wealthy buyers tear out even nice upgrades and redo to their taste. So it depend. In most properties but more so in high end, buyers have a "dominant feature " they look for, ocean view or deep waterfront or urban / penthouse/ luxury building etc. Then a lesser list of other features they want. Lower priced properties may be more about filling needs and upper priced about fulfilling wants and mid priced a mix of both.

High end properties can be challenging but not for the reasons you state- more due to games played with the transactions, sch as including furniture/r boat slips/r club memberships in price, or a lower price at closing for pub records so new owner will pay less property taxes, with other $ paid outside the sale prices. Not all transactions have are gamed but when they do creates havoc with the prices.

Market exposure is another realm.., might see years rather than months in some cases. The adjustments for view, sf etc are not that hard to develop or support, they just are large.

 

[TRESinc]

How many of you actually have figured out, i.e. understand, how I adjust comps?

a better question would be does anyone care how you adjust comps, and the obvious answer would be no.