Paired Sales - Supporting Adjustments

[Roscoeman]

I don't post here very often, as I find many posters challenge (nice word to use) instead, of taking advantage of other's knowledge and possibly entertaining the thought that it might help them in their practice. I have learned so much from the some of the experts on this forum and try to share and give back what they have given so freely.

One of our Cert. USPAP instructors and a SRA that teaches fraud on the West Coast (most posters would recognize his name) are teaching and stressing this methodology.

Hope it helps some of the appraisers here.

 

[Roscoeman]

Are you suggestisng buyers and sellers sit down with a calculator and derive their offers and acceptances based on a fireplace = $2,000? Exact paired sales is nothing more than a quantative attempt to quantify the value of certain 'elements' to a property or what drives buyers and sellers to pay for a given component on any given day, given all the other market forces at the time, or in some cases, farces.

Submit an appraisal without explanation of how your adjustments were derived, and you may wish you had added some language that helped, at the very least, educate the readers. Better yet, remember this thread if a state investigator asks you for your workfile and where the support for each and every adjustment came from. With that language, you're essentially covered UNLESS you got lazy and your data afforded paired sales and didn't take the time or make the effort.

With the new regs, it is possible that more appraisers will be reported to their state boards and when it comes to defending your work???? Well, there will be some that have support in their workfile and some won't...

 

[prasercat]

Every appraisal I do offers feedback on my adjustments for a particular neighborhood as evident in the adjusted values. If all the adjusted values came out exactly the same, that would be certain evidence that I was manipulating the numbers artificially to produce a result. If by implementing all sources of data available (including data from paired sales, tempered with judgement) in a consistent methodology (not a consistent adjustment), there is normally a fairly tight range developed with about 6 or 7 sales and I can normally spot a discounted or distress sale by the adjusted value or some premium aspect not seen in the description by the MLS and photos after following it up with further research with a realtor (or very short market time, or a condition of sale), then this is important feedback that my data, approach and judgement should be producing meaningful results.

Whatever techniques are used, understanding the limitations of context, in time, location, appeal, effective age, quality, demographics, etc., then one is on the right track. If a paired sale in neighborhood A produces a fireplace adjustment of 3k and you went to a very similar prestige neighborhood but the homes were 20 years older (and so were the fireplaces and their appeal), then tacking on a 3k fireplace adjustment is ignoring obvious functional obsolescence - that takes some judgement and references to other approaches to a value derivation.

 

[Surf Cat]

[QUOTESo far two of our clients have called us and asked if they could keep our paired sales on file to reference for other appraisals.

][/QUOTE]
Absolutely not…
You answer your own question here…

Not sure how this will work in the end, however, if the other appraisals don't provide support they might be called on the carpet.

I think the opposite… YOU will be called to the carpet when your clients try to use your paired sales adjustments from your particular assignment as a “one size fits all” to “other appraisals” that are not similar in location, age, condition, construction, etc. etc.
No good deed goes unpunished. Tell them “sorry, it’s only to use for our reports. I’m glad you like us, use us on all your assignments to acquire the same level of due diligence on each and every assignment.”
I applaud you and your partner, I continue to try and improve my excel spread sheet / graphing skills. I also agree with Joyce in regards to “disclosure and discussion” of how adjustments were derived.

 

[Elliott]

Joyce,
I'm not sure how we got from 'paired sales' to explaining adjustments to state investigators, but
I'll play along. My first residential class had an instructor with 30 years of experience, could
have retired, and when he got about 6 weeks into the class told us, "Everything I've told you is
appraisal theory and practice, but the reality is after you leave the property you have to go
across the street, look at the property, and figure out how your going to appraise it." So I've
always had that attitude that you really should approach the appraisal problem with an objective
view of how your going to come up with that supportable estimate of value.


Now I don't think I've read an appraisal report where I couldn't find the numbers that
made sense and the one's that I could drive a truck though, that were soft and weekly
supported. While there are probably some markets with cookie cutter houses where paired
sales is a valid, useful technique. But its not my market.

I'm always more than happy to do a narrative explanation on how I developed an adjustment.
And there's a page in the work file that has some hand drawn graphs with some average
calculations with a circle around a few numbers that were developed and used in the report
that are circled, and they clearly look like work product and not suitable to be included
in the report. They aren't precision, they are opinion.

Fortunately, I think most state examiners know by now that appraisal isn't science and the
paired sale isn't all that pairey. I get a kick out of the antique and auto shows where the
experts are opining values based on their experience and gut, and know 'about how rare'
the item is, and come up with a value or a value range. Real Estate Appraisers have a
a 100 pages of regulations accompanied with 150 pages of explanations of the regulations
intended to make us responsible for any shenanigans. So, I still see appraisal as more
art than science, with an explanation about how I got where I did, but I think appraisers
are kidding themselves if they think they are 'proving' value to the god of USPAP.

 

[Roscoeman]

Joyce,
I'm not sure how we got from 'paired sales' to explaining adjustments to state investigators, but
I'll play along. My first residential class had an instructor with 30 years of experience, could
have retired, and when he got about 6 weeks into the class told us, "Everything I've told you is
appraisal theory and practice, but the reality is after you leave the property you have to go
across the street, look at the property, and figure out how your going to appraise it." So I've
always had that attitude that you really should approach the appraisal problem with an objective
view of how your going to come up with that supportable estimate of value.


Now I don't think I've read an appraisal report where I couldn't find the numbers that
made sense and the one's that I could drive a truck though, that were soft and weekly
supported. While there are probably some markets with cookie cutter houses where paired
sales is a valid, useful technique. But its not my market.

I'm always more than happy to do a narrative explanation on how I developed an adjustment.
And there's a page in the work file that has some hand drawn graphs with some average
calculations with a circle around a few numbers that were developed and used in the report
that are circled, and they clearly look like work product and not suitable to be included
in the report. They aren't precision, they are opinion.

Fortunately, I think most state examiners know by now that appraisal isn't science and the
paired sale isn't all that pairey. I get a kick out of the antique and auto shows where the
experts are opining values based on their experience and gut, and know 'about how rare'
the item is, and come up with a value or a value range. Real Estate Appraisers have a
a 100 pages of regulations accompanied with 150 pages of explanations of the regulations
intended to make us responsible for any shenanigans. So, I still see appraisal as more
art than science, with an explanation about how I got where I did, but I think appraisers
are kidding themselves if they think they are 'proving' value to the god of USPAP.

My highlight in blue. Not proving, however "supporting"...

 

[Joyce Potts]

As I continue to tell/train my appraisers. It's no longer about the RIGHT answer/value. It's about best supported and most compelling appraisal.

I wish that were not always true, but unfortunately, I've seen horribly written reports that were dead on the value, but failed on communication that have resulted in regulatory action. And conversly, I've seen horrible reports from A to Z that skirted the FREAB thanks, in part, to an administrative law judge that just 'didnt' get it'.

 

[Metamorphic]

I think the appraisal world is WAY too fixated on the adjustment process. If you've picked and presented (perhaps represented is a better word) comps properly, the market value should be largely obvious at that point to a person with no appraisal training.

[Foxworthy Voice] Well hey! That there one sold for $100,000 and I do believe its a bit nicer than our subject and that there one sold for $90,000 and its not quite nice. So our price ought be somewhere betwixt the 2."

THAT is the Sales Comparison Approach.

Adjustments are just a little game where you try to explain and put dollar figures on the differences. Window dressing on a foregone conclusion.

Unfortunately this window dressing has become the bling of the profession that has distracted everybody from the real job. I think its FAR more valuable to spend an hour explaining why and how each comp relates to the the subject than it spend an hour proving that a pool is worth $10,000 instead of $15,000, and that a foot of GLA is worth $50 but not $45 or $55.

 

[Joyce Potts]

I think the appraisal world is WAY too fixated on the adjustment process. If you've picked and presented (perhaps represented is a better word) comps properly, the market value should be largely obvious at that point to a person with no appraisal training.

[Foxworthy Voice] Well hey! That there one sold for $100,000 and I do believe its a bit nicer than our subject and that there one sold for $90,000 and its not quite nice. So our price ought be somewhere betwixt the 2."

THAT is the Sales Comparison Approach.

Adjustments are just a little game where you try to explain and put dollar figures on the differences. Window dressing on a foregone conclusion.

Unfortunately this window dressing has become the bling of the profession that has distracted everybody from the real job. I think its FAR more valuable to spend an hour explaining why and how each comp relates to the the subject than it spend an hour proving that a pool is worth $10,000 instead of $15,000, and that a foot of GLA is worth $50 but not $45 or $55.

It's also unrealistic to expect appraisers to try and pinpoint a point value, when we all know that a well supported and reasonable range is the way the real world works.

 

[Roscoeman]

Ok here is the bottom line. Check out the new Landsafe QC requirements. Just so you this was not one of the clients that had previously requested support for the adjustments.

FYI............