Looking for your opinion on adjustments

[TerryRohrer]

Probably a poor example, but "market reaction" to a Porsche 911S in a neighborhood full of Honda Civics isn't diminished.

Which is easier to move...a dwelling, a Porsche, or a Honda?

[As an aside I'm unaware of a database of any type of scholarly articles about residential appraisals...]

The Appraisal Institute's LUM Library is probably the most complete repository of appraisal literature in existence.

 

[J Grant]

Why doesn't anybody on the AF ever provide credible source documentation that an over-improvement is negatively affected on a per-unit basis, i.e., as affected by marginal diminishing returns? Should one simply take the concept for granted. Even the texts that I relied upon when learning the basics, as well as all Continuing Ed courses I completed describe the concept without even attempting to provide credible documentation that the phenomenon exists, or even that it is market-dependent. Probably a poor example, but "market reaction" to a Porsche 911S in a neighborhood full of Honda Civics isn't diminished. [As an aside I'm unaware of a database of any type of scholarly articles about residential appraisals...]

Because a car is movable, the Porsche can be easily sold to buyers in an affluent area.

However, if the Porsche 911 were located as real property, it would be offered only to local middle-class residents, its value would be diminished because the local working siffs could afford to pay only half of its value.

RE is not portable, howver buyers are. The concept of an over improvement is an 8000-sf luxury mansion built in a middle-class, boring subdivision of 2000-sf-max tract homes. The mansion is usually a white elephant over improvement since most wealthy buyers do not want ot live in a boring tract house development surrounded by people who are not in their social class. But 5 miles away in an affluent, swanky area, the 8000 sf mansion is competitive and attracts buyers who can afford what it offers.

 

[J Grant]

Why doesn't anybody on the AF ever provide credible source documentation that an over-improvement is negatively affected on a per-unit basis, i.e., as affected by marginal diminishing returns? Should one simply take the concept for granted. Even the texts that I relied upon when learning the basics, as well as all Continuing Ed courses I completed describe the concept without even attempting to provide credible documentation that the phenomenon exists, or even that it is market-dependent. Probably a poor example, but "market reaction" to a Porsche 911S in a neighborhood full of Honda Civics isn't diminished. [As an aside I'm unaware of a database of any type of scholarly articles about residential appraisals...]

IDK what you mean by credible source documentation. The texts and courses explain it well - if some appraisers do not grasp the concept that is on them.

 

[Webbed Feet]

Why doesn't anybody on the AF ever provide credible source documentation that an over-improvement is negatively affected on a per-unit basis, i.e., as affected by marginal diminishing returns? .....<snip>

LOL... Imagine a real estate agent saying to a prospective buying couple, that is stating a house is too big, that the buyers should make an offer based upon the buyer's estimate of marginal diminishing returns? I would imagine that, after the buyers look at each other in total confusion, the buyers would either find a new agent and/or say something like "What the bloody ........... are you talking about?"

One of the most significant educational problems our trade always has had is much of what gets taught comes from some thesis from somewhere written by someone out to make up new, never heard before, phrases to get their doctorate or publish and be famous! Perhaps something worked on for years on end, but magically we should be able to duplicate it in one to three days for $200-$300. Not to mention all sorts of other often massive "studies" to extract out market data that realistically have, at best, a three to six month shelf life and would then need to be done all over again. The market for site specific fee services has no interest in paying to actually have scientifically based results or data. In fact, they demand non-scientific point values.

So why most likely do you never see an AF member handing out days, weeks, months, of work for free on here? Probably because they are too busy dodging around tons of copious rules, guidelines, and requests that mostly have very little to do with obtaining a credible value of real estate all so that, in the end, they can be paid for their best guess. Just to be told their guess isn't trusted so here are a bunch of stips.

 

[J Grant]

LOL... Imagine a real estate agent saying to a prospective buying couple, that is stating a house is too big, that the buyers should make an offer based upon the buyer's estimate of marginal diminishing returns? I would imagine that, after the buyers look at each other in total confusion, the buyers would either find a new agent and/or say something like "What the bloody ........... are you talking about?"

One of the most significant educational problems our trade always has had is much of what gets taught comes from some thesis from somewhere written by someone out to make up new, never heard before, phrases to get their doctorate or publish and be famous! Perhaps something worked on for years on end, but magically we should be able to duplicate it in one to three days for $200-$300. Not to mention all sorts of other often massive "studies" to extract out market data that realistically have, at best, a three to six month shelf life and would then need to be done all over again. The market for site specific fee services has no interest in paying to actually have scientifically based results or data. In fact, they demand non-scientific point values.

So why most likely do you never see an AF member handing out days, weeks, months, of work for free on here? Probably because they are too busy dodging around tons of copious rules, guidelines, and requests that mostly have very little to do with obtaining a credible value of real estate all so that, in the end, they can be paid for their best guess. Just to be told their guess isn't trusted so here are a bunch of stips.

RE agents don't talk like that, most of them "advise" a client to pay as much as possible so the seller takes the offer. Only a rare few agents are ethical enough or knowledgeable enough to suggest anything else.

RE appraisers base their analyses and adjustments on WHAT BUYES DO, and when buyers are not paying for excess sf and too large a house or lot makes it a white elephant where the value is not being paid for being bigger or better, then the concept of diminishing returns or over improvement comes into play.

The appraisers use certain verbiage, but the observations are based on what happens in the market.

 

[alebrewer]

The appraisers use certain verbiage, but the observations are based on what happens in the market.

At least theoretically.

 

[J Grant]

Years ago, I appraised a huge oversized house, and a second appraiser was hired to appraise it at the same time (typical for high value properties ) . I called it an over improvement. The other appasie did not and dragged in big homes from superior waterfront areas. Their appraisal was 4 million $ higher than mine. The bank liked their appraisal better and priced it high. The home sat on the market for three years until finally the bank reduced it close to my appraised value and then it sold.

 

[J Grant]

At least theoretically.

The theory should align with what buyers do and show a pattern over a period of years.