Looking for your opinion on adjustments

[Terrel L. Shields]

DE as an economist.

See attachment or https://www.tandfonline.com/doi/abs/10.1080/10835547.1990.12090600
I worked on classes as part of my scheduled work. I have taught 3 classes and sold one to a school no longer in business. I have several versions of the minerals courses I taught. I have presented in both formal classes and in online classes and industry (Mineral rigths) groups. I have written the text to go with it. I did a class on Rural Structures and one on depreciation and obsolescence. Are the classes perfect? undoubtedly not but I relied upon the works before me to develop the classes.

why is the M&S defult 60 years when most, or all, typical SFR's last much longer,

What house goes untouched for 50 or 60 years? Each update or repair extends the remaining life. The short-term items are just that but part of the overall depreciation. Failing in 5-15 years, while the AC might last 30 most will fail in 15 or less. Roofing? 20-year life usually. A slate roof might last 100-200 years. Again, USPAP does not ask you to dissect the depreciation. It does not require you estimate the RCN from the assembles method nor itemizing the materials and estimating the labor. M & S rates total live according to the quality rating with the lowest grades 45 on up.

Our analysis is a snapshot. A very simple snapshot in time. The effective age is an easy way to calculate but in reality we are more interested in the remaining life.

 

[ZZGAMAZZ]

See attachment or https://www.tandfonline.com/doi/abs/10.1080/10835547.1990.12090600
I worked on classes as part of my scheduled work. I have taught 3 classes and sold one to a school no longer in business. I have several versions of the minerals courses I taught. I have presented in both formal classes and in online classes and industry (Mineral rigths) groups. I have written the text to go with it. I did a class on Rural Structures and one on depreciation and obsolescence. Are the classes perfect? undoubtedly not but I relied upon the works before me to develop the classes.

What house goes untouched for 50 or 60 years? Each update or repair extends the remaining life. The short-term items are just that but part of the overall depreciation. Failing in 5-15 years, while the AC might last 30 most will fail in 15 or less. Roofing? 20-year life usually. A slate roof might last 100-200 years. Again, USPAP does not ask you to dissect the depreciation. It does not require you estimate the RCN from the assembles method nor itemizing the materials and estimating the labor. M & S rates total live according to the quality rating with the lowest grades 45 on up.

Our analysis is a snapshot. A very simple snapshot in time. The effective age is an easy way to calculate but in reality we are more interested in the remaining life.

Thanks very much. The qualilty and quantity of info is overwhelming but kinda disappointing that the fee to read the article even after registering for the publication is more than $60.

 

[Terrel L. Shields]

Thanks very much. The qualilty and quantity of info is overwhelming but kinda disappointing that the fee to read the article even after registering for the publication is more than $60.

I think the download of the article should be visible. It's a zip file which should open to a pdf. If not, PM me and I can send a pdf direct to you. AF usually don't like pdf's.

 

[Webbed Feet]

IMO the Location and View adjustments often can be combined and reported as one or the other, with an explanation provided.

However, the topic of my post was comingling other adjustments, such as view or location, into an adjustment for differences in GLA. All in response to the question of using dissimilar "per comp" GLA adjustments supposedly to account for differences that are not attributable to GLA differences in the first place.

 

[ZZGAMAZZ]

However, the topic of my post was comingling other adjustments, such as view or location, into an adjustment for differences in GLA. All in response to the question of using dissimilar "per comp" GLA adjustments supposedly to account for differences that are not attributable to GLA differences in the first place.

I realize that. I had nothing pertinent to say, and I'm bored AF, so I tried to hijack the post. LOL

 

[alebrewer]

I reviewed one report where the appraiser obviously adjusted the cost approach to match the sales approach and to do so

I find this to be the norm, not the exception.

 

[Webbed Feet]

<snip> ........................ 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. .................<snip>

IN MY MARKET AREAS I have so far, after many years, have never read even a single appraisal report that claims how some amount of living footage "no longer adds value...." have one iota of proof that the random appearing selection of "over-improved" footage was actually an over-improvement.

I realize over-improvements related to size do exist. But when they do, why would they be used for a comparable? If they are a subject, it is a complex appraisal assignment that, in my opinion, no less than 95% of real estate appraisers have no business taking the assignment as they are clueless what to do with it. However, what I have always seen the method of not adjusting the footage used, in my less than humble opinion, as just a stupid trick for when the appraiser has a 5,000 square foot subject property, they cannot find enough actual comps sold within six months. So they toss a 9,000 square foot home improved sale at it and declare that a 4,000 square foot difference doesn't need to be considered via adjusting for it therefore the two are comparable. Voila!!!! Look at that, they hit the subject sale price or needed refinance value. What a mystery! Of course, everyone is supposed to completely ignore that the general location has many 7,000 to 12,000 square foot homes all over the place and there isn't a shred of evidence they are market over-improvements.

 

[J Grant]

IN MY MARKET AREAS I have so far, after many years, have never read even a single appraisal report that claims how some amount of living footage "no longer adds value...." have one iota of proof that the random appearing selection of "over-improved" footage was actually an over-improvement.

I realize over-improvements related to size do exist. But when they do, why would they be used for a comparable? If they are a subject, it is a complex appraisal assignment that, in my opinion, no less than 95% of real estate appraisers have no business taking the assignment as they are clueless what to do with it. However, what I have always seen the method of not adjusting the footage used, in my less than humble opinion, as just a stupid trick for when the appraiser has a 5,000 square foot subject property, they cannot find enough actual comps sold within six months. So they toss a 9,000 square foot home improved sale at it and declare that a 4,000 square foot difference doesn't need to be considered via adjusting for it therefore the two are comparable. Voila!!!! Look at that, they hit the subject sale price or needed refinance value. What a mystery! Of course, everyone is supposed to completely ignore that the general location has many 7,000 to 12,000 square foot homes all over the place and there isn't a shred of evidence they are market over-improvements.

Most of the time when we use over improvements as comps, we do ,as you note, have a subject which is an over improvement.

 

[J Grant]

IN MY MARKET AREAS I have so far, after many years, have never read even a single appraisal report that claims how some amount of living footage "no longer adds value...." have one iota of proof that the random appearing selection of "over-improved" footage was actually an over-improvement.

I realize over-improvements related to size do exist. But when they do, why would they be used for a comparable? If they are a subject, it is a complex appraisal assignment that, in my opinion, no less than 95% of real estate appraisers have no business taking the assignment as they are clueless what to do with it. However, what I have always seen the method of not adjusting the footage used, in my less than humble opinion, as just a stupid trick for when the appraiser has a 5,000 square foot subject property, they cannot find enough actual comps sold within six months. So they toss a 9,000 square foot home improved sale at it and declare that a 4,000 square foot difference doesn't need to be considered via adjusting for it therefore the two are comparable. Voila!!!! Look at that, they hit the subject sale price or needed refinance value. What a mystery! Of course, everyone is supposed to completely ignore that the general location has many 7,000 to 12,000 square foot homes all over the place and there isn't a shred of evidence they are market over-improvements.

What you describe is a crappy number-hitting appraisal if they use a 9000 sf comp for a 5000 sf house to hit a sale price while ignoring more similar sales. But who knows if such a thing takes place in the AVM portion of a waiver/value acceptance?

Moving on, adjusting the rote per sf is not always the answer- does a buyer really care if a home is 2100 sf vs 2200 sf? As to why adjusting for 100 sf might not be supported, we might see the 2100 sf house sell for more if it has a better floor plan, which is a different issue than an over improvement.

 

[ZZGAMAZZ]

Most of the time when we use over improvements as comps, we do ,as you note, have a subject which is an over improvement.

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...]