New USPAP Q&As published March 6, 2025

[Joe Flacco]

I never argued that all differences must be quantitatively adjusted for. However, the major drivers of value need to be addressed quantitatively if there are meaningful differences between the subject and comps. By the way, every time you report an appraisal on the URAR with its pre-printed sales comparison grid you are reporting a quantitative adjustment for the different property attributes listed on each and every line of the sales comparison grid (assuming there is a difference between the subject property and comps in regards to that attribute) even if you are reporting that the adjustment is zero (or no adjustment) in the "+(-) $ Adjustment" column as zero is a quantifiable numeric data point.

That is absolutely not true.

If you want to you can put 3 comps in the report that have differences, make no adjustments at all, and then reconcile the sales comparison approach by summarizing which comp is the best and why.

It is perfectly acceptable to not make adjustments but to consider the differences in the reconciliation.

 

[sputnam]

The Appraisal Foundation just release new USPAP Q&A's, which can be accessed here: https://appraisalfoundation.sharefile.com/share/view/s204bf3489b924724ac26de89653ded87

The first new Q&A makes it clear that basing adjsutments on nothing more than an appraiser's experience is not sufficient to meet USPAP requirements for credible assignment results:

2025-01: Using Experience as Support for Adjustments
Question: If an appraiser is competent to perform a specific assignment, and has
extensive experience in that type of assignment, can they support an adjustment
for a property's proximity to a park solely based on that experience?

Answer:
No, experience cannot be a recognized method or technique or a substitute for
relevant evidence and logic. Adjustments are a type of assignment result and
must meet USPAP’s requirements for credible assignment results.

Thank you! I've been griping about appraisal reports that claim 'Appraiser Experience' as the source for building costs... or... as the support for site value for years.

 

[Zoe]

Thank you! I've been griping about appraisal reports that claim 'Appraiser Experience' as the source for building costs... or... as the support for site value for years.

If you ever appraised new subdivision developments, you would find that developers don't charge much difference on lot sizes. Absorption rates and discounted cash flow is the only way to appraise a new development. Lot sizes and different aspects can make a difference in the discounted cash flow analysis.

But depending, the lot size difference makes very little difference in the analysis. Water rights or view or something like that would.

Can't base it on appraisal experience. Need market data. Cost, sales, income, etc.

Depreciated cost is fine, but land don't depreciate. It can go down or up in value for different reasons, but it don't depreciate.

On a new subdivision, cost approach is not really relative. It is all discounted cash flow analysis. You put the developer's cost estimates in. Not based on cost approach.

On a new residential development, sales comparison and income cap approach are all that matter. Most weight is given to discounted cash flow analysis.

 

[Tom D]

I have this in my report, pretty good defense. Really, does USPAP understand appraising.
This will never be full time for me again, it is becoming too annoying. Can't wait for the new uad to walk me over to the cliff. Have started to transition to another past life business, which i hope all of
you have given a lot of thought to doing, besides retirement.

The Appraising Residential Properties, 4th Edition, Appraisal Institute, "Other Quantitative Adjustment Techniques”, Page 344 further states: “…In instances where paired sales analysis is not conclusive, the appraiser may apply judgment to resolve the problem." The adjustments resulting from the appraiser's judgment is based on a study and understanding of historic or past buyer preferences. It further suggests that cost and depreciated cost data may be used with the appraiser arriving at the value contribution (not cost new) of certain features. The process of supporting the contribution of individual variables (features) is limited and often difficult to quantify, with adjustment deemed to be qualitatively supported unless otherwise addressed. All methods of supporting adjustments are usually limited by inherent uncertainties within the applications themselves.

Adjustments, in this report, are based on a combination of Paired Analysis with Sensitivity and/or Trend Analysis & on a study and understanding of historic or past buyer preferences. Support for adjustments may be based on multiple applications and rarely do two methods return identical results with a high degree of accuracy. While not always 'strongly' independently supported, collectively, the adjustments serve to narrow the adjusted value range of the comparables in support of the subject's 'most probable selling price' commensurate with the definition of Market Value set forth herein.

 

[J Grant]

I have this in my report, pretty good defense. Really, does USPAP understand appraising.
This will never be full time for me again, it is becoming too annoying. Can't wait for the new uad to walk me over to the cliff. Have started to transition to another past life business, which i hope all of
you have given a lot of thought to doing, besides retirement.

The Appraising Residential Properties, 4th Edition, Appraisal Institute, "Other Quantitative Adjustment Techniques”, Page 344 further states: “…In instances where paired sales analysis is not conclusive, the appraiser may apply judgment to resolve the problem." The adjustments resulting from the appraiser's judgment is based on a study and understanding of historic or past buyer preferences. It further suggests that cost and depreciated cost data may be used with the appraiser arriving at the value contribution (not cost new) of certain features. The process of supporting the contribution of individual variables (features) is limited and often difficult to quantify, with adjustment deemed to be qualitatively supported unless otherwise addressed. All methods of supporting adjustments are usually limited by inherent uncertainties within the applications themselves.

Adjustments, in this report, are based on a combination of Paired Analysis with Sensitivity and/or Trend Analysis & on a study and understanding of historic or past buyer preferences. Support for adjustments may be based on multiple applications and rarely do two methods return identical results with a high degree of accuracy. While not always 'strongly' independently supported, collectively, the adjustments serve to narrow the adjusted value range of the comparables in support of the subject's 'most probable selling price' commensurate with the definition of Market Value set forth herein.

Great post - the last paragraph is well written; however, IMO, it would be far better to write the "comparables in support of the market value opinion."

The MV definition exists to frame the terms and conditions of the price the transition should bring - ( the $ amount the property "should" sell for if it met certain sale conditions outlined in the definition of value used ). The MV definition lays out the terms of sale and buyer and seller motivations. The price part it references is not literally the opinion of value - the opinion of value is the appraisal (USPAP )

 

[Tom D]

Great post - the last paragraph is well written; however, IMO, it would be far better to write the "comparables in support of the market value opinion."

There you go, am doing that. That thought makes up for your politics, hahahah.

 

[CGinMN]

An adjustment that is a modification to the price of a comparable to account for differences between it and the subject is by its very nature a quantitative adjustment

Comp 1 adjusted to $300,000 before considering differences for windows. After considering this difference it adjusts to $300,000 + $X. Its price has been modified (adjusted) by an unquantified amount (qualitative).

On the other hand, grouping or weighting comparable sales based on the differences between them and the subject is a form of qualitative analysis, but this does not involve an adjustment or modification to the price of the comparable sales.

Comps 1 and 2 adjusted to $300,000 and $305,000 before considering significant differences for windows. Comps 3 and 4 adjusted to $320,000 and $320,000 respectively. They both have new windows, but also new roofs and Comp 4 has new HVAC as well, which the subject lacks. Adjustments made as follows:

Comp 1 - $300,000+
Comp 2 - $305,000+
Comp 3 - $320,000-
Comp 4 - $320,000--

I’m not sure why, but you seem to be arguing there’s no such thing as qualitative adjustment, only qualitative analysis?

 

[The Bob]

That is absolutely not true.

If you want to you can put 3 comps in the report that have differences, make no adjustments at all, and then reconcile the sales comparison approach by summarizing which comp is the best and why.

It is perfectly acceptable to not make adjustments but to consider the differences in the reconciliation.

I've often thought that this is the better way to do it. Buyers don't make "adjustments". They go through a series of compromises.

I've told this story before,

Realtor friend told me about an appraiser hired for litigation. His appraisal was just like JF described above....all qualitative. The reason he did that is because any appraisal based on individual adjustments for differences in features can be challenged. By focusing on the differences in a qualitative manner ("Sale #1 has more GLA, therefore in MY OPINION it's superior to the subject, etc...) it truly is his opinion. And, while you may disagree with an opinion, you can't argue it is factually incorrect.

 

[J Grant]

I've often thought that this is the better way to do it. Buyers don't make "adjustments". They go through a series of compromises.

I've told this story before,

Realtor friend told me about an appraiser hired for litigation. His appraisal was just like JF described above....all qualitative. The reason he did that is because any appraisal based on individual adjustments for differences in features can be challenged. By focusing on the differences in a qualitative manner ("Sale #1 has more GLA, therefore in MY OPINION it's superior to the subject, etc...) it truly is his opinion. And, while you may disagree with an opinion, you can't argue it is factually incorrect.

The problem with the hyper-focus of Fannie/Freddie on "fact" or "precise/accurate/WRT adjustments is it frightened some appraisers into overcompensating and trying for a false "accuracy" or the other extreme, making no adjustments and relying only on qualitative.

Buyers do, in fact, make adjustments with their wallets - buyers pay more for positive features and expect a discount for accepting an adverse feature or having to make repairs. We translate what they pay into adjustments.

No matter how we arrive at our adjustments, they're a model, not actual fact, because in the real world, every buyer might each pay a different $ amount for a pool (for example ) One buyer would pay 25k more, another 15k more, another 30 k more, etc. But the average, or most probable adjustment is seen as 25k for that type of property and price range. The support for it should be credible - it is never factual because buyers in the real market might pay different amounts to get a subject with a pool vs no pool. Regression, charts, and graphs are tricky because their numbers appear factual, but they are still a model-.

Additional support for the 25k pool adjustment of a 15-year-old pool is cost new to build a similar pool in the 40-50k range. Thus one might point to the 25k pool adjustment as a depreciated cost as well as the paired sales /sensitivity extraction, regression, etc, as support.

An informed buyer has a rough idea of what things cost new to replace or build- and so should we of course

 

[alebrewer]

I get yearly stool test. Less invasive.

wow... wanna publish that in the SF Times?