Noob Questions pt.1

[ShortSeller]

Greetings aII,

I've got a laundry list of questions from my newbie experiences. I wiII ask onIy a few to make sure this post is not overwhelming for the reader.

When making Iine adjustments for gIa, does anyone put a sqft threshold on the adjustment? Why or why not? Would one mention this in the addendum?

What are the best ways to go about documenting pairs saIes analysis? I know documented pair saIes, groups saIes, or any other market derived adjustments and how you got them need to be in the workfiIe correct?

At what point would you consider utilizing a market(time) adjustment? anything over 3 months? 2? 1? my mentor never reaIIy used them even though the market was going up month over month, i think he was trying to keep his gross % adjustments down

What date do you use for your cost approach effective date?


Cheers everyone

 

[Russ Kitzberger]

When making Iine adjustments for gIa, does anyone put a sqft threshold on the adjustment? Why or why not? Would one mention this in the addendum?

A logical threshold would not exceed the amount of contribution of the amenity to the overall property value. If you are in an area that is 1/3 land, 1/3 building base cost and 1/3 amenities, your adjustment would be around 1/3 for building area. Are you doing a depreciated cost approach? If so, you can pretty easily figure out the depreciated building area base cost.

What are the best ways to go about documenting pairs saIes analysis? I know documented pair saIes, groups saIes, or any other market derived adjustments and how you got them need to be in the workfiIe correct?

The sales comparison courses show how to develop these adjustments. You document what you did, if you have a spreadsheet, MLS's or handwritten calculations, save it to the workfile.

At what point would you consider utilizing a market(time) adjustment? anything over 3 months? 2? 1?

If the market is growing daily, adjust daily. Some people would do monthly, bi-monthly, etc, if there is a lack of consistent daily sales.

my mentor never reaIIy used them even though the market was going up month over month, i think he was trying to keep his gross % adjustments down

You really can't make a judgment on whether it was warranted or not until you review the work and perhaps the workfile. If that was a error; you might have issues if Colorado requires a review of your reports when you apply for your license.

What date do you use for your cost approach effective date?

This should be the effective date of your appraisal.

 

[Dublin ohio]

When making Iine adjustments for gIa, does anyone put a sqft threshold on the adjustment? Why or why not? Would one mention this in the addendum?

It depends on your market. For the most part. I do not see market reaction until the difference does reach a "threshold". What that threshold is depends on the market . Small homes tend to have a low threshold. Larger homes typically have a higher threshold. Do you think a buyer would notice 50 sf difference in a 2500 sf home?

What are the best ways to go about documenting pairs saIes analysis? I know documented pair saIes, groups saIes, or any other market derived adjustments and how you got them need to be in the workfiIe correct?

Just document your data and analysis. Whatever method you use.

At what point would you consider utilizing a market(time) adjustment? anything over 3 months? 2? 1? my mentor never reaIIy used them even though the market was going up month over month, i think he was trying to keep his gross % adjustments down

Again. Market specific. I tend to look at an overall trend over the year and usually run a 2 year trend. Helps account for typical seasonal changes. Others may track on a quarterly or even monthly basis. As far as keeping adjustment percentages down. That is typically the least of my worries.

 

[Dublin ohio]

What date do you use for your cost approach effective date?

If you are referring to the effective date of cost data on page 3. That would depend on your data source and what the date of their latest update would be

 

[Tim The Enchanter]

When making Iine adjustments for gIa, does anyone put a sqft threshold on the adjustment? Why or why not? Would one mention this in the addendum?

A small diff in GLA isn't going to even be noticeable. For most places I draw the line at 100 SF, I have to draw it somewhere. For a big house maybe the line is a higher number. For a tiny place maybe 50 SF is the line. Lot size is kind of the same deal, I start with a 1,000 SF line in most places.

YMMV.

 

[Elliott]

1. Run some correlations, maximum 90% of SP/SF, goes down to 50% (dogs).
2. I once had paired sales and Fannie accused me of overstating their condition (they were all remodeled), so basically paired sales are very rare in my market, and I'm happy they are.
3. I just use recent sales and the 5th sale might be old, but is given next to no weight, so I don't adjust it (when it sold it didn't know what the market was going to do in 5 months. Sales aren't clairvoyant).

 

[shrubberyvaluation]

Greetings aII,

I've got a laundry list of questions from my newbie experiences. I wiII ask onIy a few to make sure this post is not overwhelming for the reader.

When making Iine adjustments for gIa, does anyone put a sqft threshold on the adjustment? Why or why not? Would one mention this in the addendum?

What are the best ways to go about documenting pairs saIes analysis? I know documented pair saIes, groups saIes, or any other market derived adjustments and how you got them need to be in the workfiIe correct?

At what point would you consider utilizing a market(time) adjustment? anything over 3 months? 2? 1? my mentor never reaIIy used them even though the market was going up month over month, i think he was trying to keep his gross % adjustments down

What date do you use for your cost approach effective date?


Cheers everyone

for line adjustments for GLA it depends on the market. The market may see a difference between a 300-350 sf condo and not see a difference between a 10,000-10,050 sq.ft. house.

Keep a workfile

I use market condition adjustments when it is warranted by the market. If you are doing something to keep adjustments down instead of using the market as your guide you are doing it wrong.

 

[Tim The Enchanter]

300-350 sf condo and not see a difference between a 10,000-10,050 sq.ft. house.

For the condo 50 SF makes a more spacious unit. You would likely notice.
For the house it's a rounding error. Nobody will ever notice 50 SF.

 

[CGinMN]

When making Iine adjustments for gIa, does anyone put a sqft threshold on the adjustment?

A logical threshold would not exceed the amount of contribution of the amenity to the overall property value. If you are in an area that is 1/3 land, 1/3 building base cost and 1/3 amenities, your adjustment would be around 1/3 for building area. Are you doing a depreciated cost approach? If so, you can pretty easily figure out the depreciated building area base cost.

I run into cost-based adjustment issues when the land value “as vacant” starts to increase. Let’s say the total value of a property is $300k, but the land value is $250k, and the GLA is 1250sf. Does that mean the GLA adjustment is substantially less than $40/sf? What if $/sf has a strong correlation to the overall value, with all the comps selling for $230-$250/sf? Interested to hear what others do in these situations. I now shy away from cost-based adjustments for homes in urban areas and homes that don’t compete against new construction. Also staying consistent with methods is important. I often doesn’t work to mix regression, cost, matched pairs, etc.

 

[Russ Kitzberger]

Let’s say the total value of a property is $300k, but the land value is $250k, and the GLA is 1250sf. Does that mean the GLA adjustment is substantially less than $40/sf? What if $/sf has a strong correlation to the overall value, with all the comps selling for $230-$250/sf?

That case is might be an underutilization of land and the existing improvement might not be the ideal improvement. You could have incurable obsolescence to the land as it is underutilized, it could be curable with a renovation/addition/use change, or you have an issue there with remaining economic life and higher depreciation.