Looking for your opinion on adjustments

[RCA]

I just had a "chief appraiser" tell me that adjustments should not be made by comparing median price per square foot and then applying that to the living area in order to ascertain a market data driven adjustment. Further, he continued to tell me that a pool adjustment should be the same across the board.... for example a $11/sq.ft adjustment for a living area of 4400sqft should be exactly the same as that of a comparable with 3200sqft.

I dont agree at all ... if the adjustment were percentage based, would it be exactly the same across the board?

Sales price contribution in the SF Bay Area typically rises fastest in the first 1000 sf (+/-), then tapers off over the next several hundred to 1.5K sf (+/-), then levels off and eventually possibly drops. In other areas, Price contribution can rise linearly with sf. In some very wealthy areas, it can rise faster with larger homes out to thousands of sf. It depends on the neighborhood. If you have a market area with large subdivisions featuring different average-sized homes and quality, you can get a zig-zag pricem contribution vs GLA sf graph.

... It just depends.

Maybe the "chief appraisers" was only talking about some specific market area.

 

[ZZGAMAZZ]

Sales price contribution in the SF Bay Area typically rises fastest in the first 1000 sf (+/-), then tapers off over the next several hundred to 1.5K sf (+/-), then levels off and eventually possibly drops. In other areas, Price contribution can rise linearly with sf. In some very wealthy areas, it can rise faster with larger homes out to thousands of sf. It depends on the neighborhood. If you have a market area with large subdivisions featuring different average-sized homes and quality, you can get a zig-zag pricem contribution vs GLA sf graph.

... It just depends.

Maybe the "chief appraisers" was only talking about some specific market area.

... or maybe he just isn't accustomed to being challenged about anything he says--a malaise that is common throughout a fragmented industry like ours where appraisal entities exist like independent cells that comprise a jihad enterprise, without any interaction--nor any mandatory commonality of protocol.

 

[Fnbpos]

I thought that the issue being addressed is not whether a larger DU should be adjusted downward, but whether the magnitude of the per-unit factor should change as the difference between subject and comparable changes--similar to the reason that appraisers reject a realators' reccomentation to apply the $/SqFt of a smaller SFR to a larger SFR that is the subject of an assignment. [BTW I don't understand why the AF rejects the possibility of a "sliding scale" adjustment factor to reflect "diminishing marginal returns" that theoretically could/should pertain to any quantitative factor, e.g., lot size, construction date, GLA, GBA....]

An excellent response and one that understands the situation at hand. Responses such as .... Use a comp from somewhere else....or use an older comp ....or I would never use that for a comp don't offer anything to the conversation. This is a rare situation - almost never needed to be considered. Sometimes its all you have to work with so you should be aware that it is possible. Someone here stated that this method your help "hit the target". Its just the opposite - adjusting the large GLA at a higher rate (IF YOU CAN PROVE IT) will increase the negative adjustment - lowering the adjusted sale price. Whoever herein said the GLA adjustment MAY not always be on a straight line basis is correct.

We don't even want to go down the road of needing to use comps with limited improvement contribution and others with significantly more improvement contribution value in the same analysis. This isn't something that comes up for the cookie-cutter or tract home appraiser. Don't want anyone's head to explode.

 

[ZZGAMAZZ]

An excellent response and one that understands the situation at hand. Responses such as .... Use a comp from somewhere else....or use an older comp ....or I would never use that for a comp don't offer anything to the conversation. This is a rare situation - almost never needed to be considered. Sometimes its all you have to work with so you should be aware that it is possible. Someone here stated that this method your help "hit the target". Its just the opposite - adjusting the large GLA at a higher rate (IF YOU CAN PROVE IT) will increase the negative adjustment - lowering the adjusted sale price. Whoever herein said the GLA adjustment MAY not always be on a straight line basis is correct.

We don't even want to go down the road of needing to use comps with limited improvement contribution and others with significantly more improvement contribution value in the same analysis. This isn't something that comes up for the cookie-cutter or tract home appraiser. Don't want anyone's head to explode.

Thanks very much. Uncanny factor about the AF, however, is the correlation between atypical topics or perspectives, and similar real-world scenarios, often way more frequently than normal!!!

 

[ZZGAMAZZ]

... and as often happens, kinda coincidentally, I just encountered an article entitled "The Impact of Relative Size on Home Values," The Appraisal Journal, Winter 2013, Asabere & Huffman. The authors indicate that surprisingly little research exists about market reaction to DU'S smaller or larger, and that the primary industry sources dont address differences quantitatively..

 

[RCA]

If you know what you are doing, all comps will adjust to the same "adjusted sale price" value. More similar homes will have smaller total gross adjustments and less similar homes will have higher gross adjustments. But their final values should all be the same, because -- all comps are getting adjusted to the same subject property and that is what adjustments are supposed to do, ie. bring the comps feature value contribution to the same value as the subject feature value contribution, with all feature contributions adding up exactly to the net sale price in the case of comps and the estimated subject sale price (e.g. MV) in the case of the subject (which is the same as the weighted average of the adjusted sales prices, which being all the same value, means it is equal to the adjusted sale prices as well). It's pretty simple and tight logic, and God please tell me why after all these years other appraisers can't understand this god damn simple thing.

 

[Zoe]

If you know what you are doing, all comps will adjust to the same "adjusted sale price" value. More similar homes will have smaller total gross adjustments and less similar homes will have higher gross adjustments. But their final values should all be the same, because -- all comps are getting adjusted to the same subject property and that is what adjustments are supposed to do, ie. bring the comps feature value contribution to the same value as the subject feature value contribution, with all feature contributions adding up exactly to the net sale price in the case of comps and the estimated subject sale price (e.g. MV) in the case of the subject (which is the same as the weighted average of the adjusted sales prices, which being all the same value, means it is equal to the adjusted sale prices as well). It's pretty simple and tight logic, and God please tell me why after all these years other appraisers can't understand this god damn simple thing.

If land values are similar, there are economies of scale. With all other factors being equal, the 4,000 sq ft. will sell for less per sq ft and the 2500 sf house will sell for more per sq ft.

Same way when the builder built the houses. The 2,500 sf house cost more per sq ft to build than the 4,000 sq ft house. If this is a subdivision house with like 200 homes in the subdivision like JGrant mentioned, there is no way I would use the 4,000 sq.ft. house. It sounds like the 4,000 sq.ft. house is an overimprovement for the subdivision.

 

[ZZGAMAZZ]

If you know what you are doing, all comps will adjust to the same "adjusted sale price" value. More similar homes will have smaller total gross adjustments and less similar homes will have higher gross adjustments. But their final values should all be the same, because -- all comps are getting adjusted to the same subject property and that is what adjustments are supposed to do, ie. bring the comps feature value contribution to the same value as the subject feature value contribution, with all feature contributions adding up exactly to the net sale price in the case of comps and the estimated subject sale price (e.g. MV) in the case of the subject (which is the same as the weighted average of the adjusted sales prices, which being all the same value, means it is equal to the adjusted sale prices as well). It's pretty simple and tight logic, and God please tell me why after all these years other appraisers can't understand this god damn simple thing.

Classical residential appraisal theory is based upon an Opinion, which is based upon a logical, sequential process that includes two seminal procedures--both termed "Reconciliation"--among comparables and among approaches, the latter that provides lip service. Does your premise eliminate the role of Reconciliation in the SCA by providing a level of precision that contradicts the definition of "Appraisal"?

 

[Zoe]

Yeah, with all other factors being equal. The typical buyer of the 2,500 sq ft house is not going to want the 4,000 sq ft house and vice versa and that is directly related to MV definition.

 

[ZZGAMAZZ]

Yeah, with all other factors being equal. The typical buyer of the 2,500 sq ft house is not going to want the 4,000 sq ft house and vice versa and that is directly related to MV definition.

I didn't understand ur recent comment about the relationship of size to MV but the article cited in Post35 explained it.