Looking for your opinion on adjustments

[MTM Valuation LLC]

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?

 

[alebrewer]

If you're talking about GLA adjustments, I've always found that sensitivity analysis works swimmingly (assuming you're able to bracket GLA). And that technique would, by necessity, employ a static adjustment factor across comps.

Also - not sure why 'chief appraiser' is in italics? Do you question his or her position?

 

[J Grant]

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?

Peer practice is a standard in USPAP. Most appraisal peers adjust the same $ per sf among comps - regardless of size. $100 per sf for all the comps ( as an example ) ... unless there is a reason, such as a comp is an overly large and thus an over improvement, where the SF stops adding value after X. Then explain the reasoning behind it.

Typically, pool adjustments are the same for all the comps, but again, if there is a reason, such as a small pool or a luxury custom pool, it provides a reason for adjusting it differently.

 

[MTM Valuation LLC]

that is what i was getting at ... same $/sq.ft adjustment... if i have a $5/SQ.FT difference for a home with a pool vs with out a pool .. i would apply that $5 to the GLA to find the downward adjustment (sp has no pool in this example.)

Peer practice is a standard in USPAP. Most appraisal peers adjust the same $ per sf among comps - regardless of size. $100 per sf for all the comps ( as an example ) ... unless there is a reason, such as a comp is an overly large and thus an over improvement, where the SF stops adding value after X. Then explain the reasoning behind it.

Typically, pool adjustments are the same for all the comps, but again, if there is a reason, such as a small pool or a luxury custom pool, it provides a reason for adjusting it differt

 

[J Grant]

that is what i was getting at ... same $/sq.ft adjustment... if i have a $5/SQ.FT difference for a home with a pool vs with out a pool .. i would apply that $5 to the GLA to find the downward adjustment (sp has no pool in this example.)

I do not follow your thinking - a pool should be adjusted separately from the sf of the house. One adjustment is made for the living area of the dwelling and a separate adjustment is made for the pool.

Are you doing it the way RE agents do? They divide the sale price (that includes the land and the pool) they divide the total sale price by the square feet of the dwelling. And come out with a crazy high $ per sf, and of course, with different sale prices, the sf with their method would adjust differently per sf.

 

[MTM Valuation LLC]

I do not follow your thinking - a pool should be adjusted separately from the sf of the house. One adjustment is made for the living area of the dwelling and a separate adjustment is made for the pool.

Are you doing it the way RE agents do? They divide the sale price (that includes the land and the pool) they divide the total sale price by the square feet of the dwelling. And come out with a crazy high $ per sf, and of course, with different sale prices, the sf with their method would adjust differently per sf.

What i mean is market data finding a selection of comps with all the same features, with a pool...then another population with exactly the same features less a pool, taking the difference in the median price per square foot of each population and applying that dollar figure to the living area to find the contributory value of the pool for each comparable that lacks a pool and that is the adjustment

 

[MTM Valuation LLC]

I do not follow your thinking - a pool should be adjusted separately from the sf of the house. One adjustment is made for the living area of the dwelling and a separate adjustment is made for the pool.

Are you doing it the way RE agents do? They divide the sale price (that includes the land and the pool) they divide the total sale price by the square feet of the dwelling. And come out with a crazy high $ per sf, and of course, with different sale prices, the sf with their method would adjust differently per sf.

What i mean is market data finding a selection of comps with all the same features, with a pool...then another population with exactly the same features less a pool, taking the difference in the median price per square foot of each population and applying that dollar figure to the living area to find the contributory value of the pool for each comparable that lacks a pool and that is the adjust

 

[MTM Valuation LLC]

If you're talking about GLA adjustments, I've always found that sensitivity analysis works swimmingly (assuming you're able to bracket GLA). And that technique would, by necessity, employ a static adjustment factor across comps.

Also - not sure why 'chief appraiser' is in italics? Do you question his or her position?

Correct

 

[J Grant]

What i mean is market data finding a selection of comps with all the same features, with a pool...then another population with exactly the same features less a pool, taking the difference in the median price per square foot of each population and applying that dollar figure to the living area to find the contributory value of the pool for each comparable that lacks a pool and that is the adjustment

I have never heard of it being done that way. Paired sales using the comps, such as with/without pools, adjust for sf and other factors, such as a view, then the pool adjustment is last. The residual whatever is left is the adjustment

Applying a typical adjustment relevant to the price range for the pool ( we can always change it a little ) should narrow the value range of the comps. Though an adjustment should not be rote cost-based, the price ne of a pool of that quality is relevant - if it costs 50k to add a pool like that, a depreciated pool, depending on age might contribute 25k, 30k, or even 40 k - we have to try different figures (known as sensitivity analysis ) and see which makes sense. Markets vary - in some climates, pools contribute a lot of value, in cooler climates, it might not.

Adjustments normally are in some kind of proportion to the price range and market expectation. A pool for a two-million-dollar house is usually custom or modern, such as vanishing edge or with a spa and waterfall etc - it might cost 120k and contribute 60k

A basic pool for a 400k house might cost 40k and contribute 20k for a 15-year-old house. These are just examples of course.

 

[Elliott]

Not 'median' SP/SF, but marginal value/SF should be the basis for an adjustment. Its the Law of Diminishing Returns, and "No one is above the law."