Must You Prove All Adjustments?

[CANative]

In my rural areas I've had to adjust ponds and small lakes to pools or other water amentities. In Miami, maybe you could find an upscale house with a Golf amenity in the back yard like a practice T or putting green.

 

[Debra]

Hello!

Well...today I received a phone call that a home owner was upset because his home appraised for $220,000 3 years ago and I appraised it for $205,000 back in November. He was floored but they are just now calling. They want me to look at the appraisal from 3 years ago. He's gotton and new well and roof and remodeled the kitchen. I only had 5 comparables to choose from (all of which were smaller than his house). The comps were $155-253. I use the 3 middle comps which also were the closest in location to his home and most similar in appearance and appeal. The lender asked why I used $18 a square foot when everybody else uses an average of $25 a square foot. They also want me to add the $253,000 comp as a forth comparable but not the $155,000 one (imagine that). I was taught to use as a square footage adjustment 1/4 to 1/3 of the square footage price. These home are $60 a square foot. The comparables are $185,000 to $235,000 now which I already considered a larger than usual range. The $253,000 home also has a $35,000 swimming pool along with other things which I'm not sure what the adjustment for that should be either.

Comment? Thanks. Debra

 

[Michigander]

Not enough information Debra.

I've never done an appraisal with such a low dollar per square foot adjustment, in particular in the $200,000 range (unless it had some major functional inadequacies or was a lake house with most the value in the land). How comfortable are you with your value opinion? How does it stack up with other houses that have sold at that price? If it is better, then you are probably low; if it is not as good, then you might be high; if it is right in there, then you are probably correct. This is an easy test to do after you have gone through all your work to arrive at your value conclusion. See how the subject stacks up against the sales in that same price range (not on the grid, but just by feel).

best, Rachel

 

[Pamela Crowley (Florida)]

Something like Debra's appraisal is where we should be able to send some back and forth between some of our peers for help.

Debra, ask your client to give you permission to have your report reviewed by another appraiser. When you get that permission, send it to me and I'll see what I can do to help in understanding what's going on with it.

 

[Terrel L. Shields]

I was taught to use as a square footage adjustment 1/4 to 1/3 of the square footage price. These home are $60 a square foot.

For residential property, I am not too keen on using such adjustments.

paired sales should reliably provide a range of value for a SF adjustment, but that is affected by what else you adjust for. Bathrooms, oversized rooms, amenities, for instance, can skewer the ratio between overall SF/$ and SF as a seperate adjustment. After all, you are not adjusting the GLA so much as that portion of the GLA in excess to a "baseline" GLA. If your house is 1,800 SF and has 3 bed, 2 bath, it may adjust differently against a 1,500 SF house with 3 bed, 2 bath from another 1,800 SF house with 4 bed, 3 bath. You are only concerned about the contribution between 1,500 and 1,800 SF, not the overall $/SF. In one comp the excess is only enclosed space, in the other it includes additional amenities.

 

[John Wilson]

Originally posted by Debra@Jan 13 2004, 02:54 PM
I only had 5 comparables to choose from (all of which were smaller than his house).  The comps were $155-253. ......These home are $60 a square foot.  The comparables are $185,000 to $235,000 now which I already considered a larger than usual range. 

You've got a comp with a pool, fine don't use it.

But you have another sale of a smaller house for $235K. How does that equate to $205K for your subject? If I'm the home owner, I'm questioning this too, in laymans terms of course.

There's no rule that says you must pick a number exactly in the middle of your comp range. Looks like that's what you did on this one. Or is there more? <_<

By the way, "NO" on proving adjustments.

 

[Tim The Enchanter]

They want me to look at the appraisal from 3 years ago.

The old appraisal is not too relevant now imho. You based your value on the comps data available now. Whether it's right is another question, but 3 year old comps?! If you have a substantial diff in the subject size or something... That's very different then.

I vote NO on "proving" adjustments. I don't think you can "prove" them.
Not mathematically, and surely not beyond the shadow of a doubt.

Not that beyond the shadow of a doubt is the standard. :lol:

 

[Alan Simmons]

One of my pet peeves is the use of unsupported adjustments. Not so much because I care that other appraisers use them in their repots, but because clients tend to give them equal weight as supported adjustments. Nothing chaps my measuring tape more than spending the time necessary to research an adjustment only to have another appraiser waste a few seconds giving a monologue about his opinion. I personally think EVERY adjustment can be at least MINIMMALLY supported. The problem is that the research costs can sometimes become prohibitive and it sometimes requires thought.

One of my favorite examples is a small one-bathroom house that did not have a shower. I spent several days (some of that time asking for help on this forum) deciding how best to address this situation. Finally, someone from the NAIFA site sent me a link to a HUD document. This document dealt with their experience about making houses handicap friendly. One paragraph specifically noted the removal of showers (replaced with special tubs) and stated that HUD found the lack of a shower to not have any negative impact on the re-sale value. Although I had originally thought that I would be making some adjustment, because of this document I made none. I was quite pleased with myself.

However, meanwhile a local designated appraiser was telling my client that only a fool would not make a $12,000 cost to cure adjustment. This was based upon the fact that he would REQUIRE a bathroom be added if it was his assignment. Unfortunately the UW (his longtime business associate) accepted his opinion as informed and suggested that my report reflect his opinion. Over the next two weeks I was under constant pressure to comply. However resistance was not futile and the UW eventually dropped the request.

Since that time this appraiser’s opinion (well respected in the area I should add) has made several of my assignments more difficult than they should have ever been. No matter how much supporting data I collect (some from members of this forum) it all seems to pale when confronted by his bewitching opinions.

I must admit that on a couple of occasions that I did experience an uncharacteristically perverse sense of pleasure from gigging him .

 

[Thomas N. Morgan]

Alan,

Seems like to me an appraiser can have a reasonable opinion, or else can be OPINIONATED. The guy that wanted a $12,000 cost to cure sound OPINIONATED to me.

Tom

 

[Mike Simpson]

"I was taught to use as a square footage adjustment 1/4 to 1/3 of the square footage price."

I was taught the same by a well respected Eastside SRA & his mentor--an equally well respected MAI.

In rational discussions with agents & builders/developers they'll agree to this premise. It's only when your opinion clashes with some other persons opinion that questions arise.

As for proving adjustments. After a period of time & proving adjustments many appraisers feel compfortable making adjustments based on their experience. It's like the Marshall & Swift Cost Manual...how many times do I need to arise from my seat, go to my bookshelf & open the book to verify what I already know?

I'll often state that information was insufficient with which to form a paired sales analysis, and the adjustment is based on the appraisers experience, market knowledge, and education.

I've yet to see a potential buyer get out of an agents car--walk down to the waterfront w/a tape measure & see how much lineal waterfront footage the property offers. They tend to buy based on the total attributes a particular property has to offer vesus other available. That can be hard to gauge or measure without a lot of experience.

-Mike