Percent adjustments

[Meandering]

When you derive your adjustments from the market by percentages, you're supposed to apply the adjustments as percentages. Ditto for whole dollar adjustments derived that way. But 10% of 400k does not change between a positive and negative adjustment.

Adjustments can be derived from market data as percentages for incremental differences, it's not commonly done in residential work but is done in commercial work.

 

[zydeco2go]

Appraisal Math 101

This was put out there to see the response from my fellow appraisers and I am amazed on the quality of responses. I know that nearly all appraisers would adjust 40K each way and perhaps that is accepted in the market (still wrong). However the correct math is this. As one asked show your math. 400,000 x 1.1 =440,000 adjusted, 400,000 / 1.1 = 363,636 as we did in high school we check our math. So...440,000 / 1.1 = 400,000 and 363,636 x 1.1 =400,000. This is just appraisal math and nothing more is intended by this post. Think before you speak.

 

[Pittsburgh Pete]

If an adjustment is extracted from two sales, the positive and negative adjustments will be different:

Sale 1: $400,000; Sale 2: $360,000. If you are computing a negative adjustment the formula would be $400,000 - $360,000 = $40,000/$400,000 = 10%

However, if it is used to compute a positive adjustment the forumla would be $400,000 - $360,000 = $40,000/$360,000 = 11.1%

Same two sales, different denominator used in computing the adjustment, different percentage adjustments depending on whether positive or negative.

 

[Kevin Mc]

Think before you speak.

Market reaction would be a difference of $36,364?.........proper math or not, that is ridculous. Unless you doing appraisals for Cal Tech or MIT I would round off those numbers.

This was put out there to see the response from my fellow appraisers and I am amazed on the quality of responses.

So you put this on the forum to see responses and apparently you are not happy with them. Ok, now offer something constructive or go away.

 

[zydeco2go]

You can stomp up and down. You can say what you will. You can rationalize as you wish, my point is if you choose to employ a percentage adjustment this is the proper way. Maybe it is not a coincidence that Real Estate values in our area havnt dropped out

 

[zydeco2go]

Oh and constructive would be trying to help my fellow appraisers use the correct math process. I see this mistake many times, but perhaps you know it all. I for one certainly dont, even after 18 yrs of doing this. just a discussion, some take it as an attack and cant play nice...SAD. Same team here.

 

[Hamlet]

You can stomp up and down. You can say what you will. You can rationalize as you wish, my point is if you choose to employ a percentage adjustment this is the proper way. Maybe it is not a coincidence that Real Estate values in our area havnt dropped out

If you are fortunate enough not to see a decline in values in your area, I'd say it has to be attributable to something other than residential appraisers misapplying a percentage rate adjustment.

 

[awesomejob]

I agree with Walter Kirk, adjustments should reflect market reaction and not blanket adjustments that are attributable in all appraisals. I was wondering are you a review appraiser? Based on your comments "based on the appraisals you've reviewed"...not exact quote. Just wondering...

 

[zydeco2go]

I made the comment originally to point out a common mistake. It was not based upon any market condition, or anything else. Point being is that it would be the correct way to make a percentage adjustment if one chose to use one. Thats all, nothing more. So dont read more into it then is needed.

 

[Terrel L. Shields]

If an adjustment is 10% of the unadjusted price, then a 10 percent adjustment is 400,000 x 1.1 UP and 400,000 x 0.9 DOWN... You are making it unnecessarily complicated by saying that you divide by 1.1, which is not technically correct if the adjustment is based upon 10% of 400,000. AND if you adjust the net adjustments. 10% of 400,000 = 40,000. Subtract or add.

I understand the concept that if the market falls 90% then rises 90%, it is not a zero sum game. But unless you analyzed the data in some obtuse way, there is no justification for it and if you use a spreadsheet to calculate the net 10% adjustments, scouts honor, its gonna come out the same way. The numbers below are not mine. They are generated by the spreadsheet...so tell it to Excel, not us.

It is nonsense for instance to say the Unadjusted price is $400,000, then adjust for time at -5%, then adjust for location, up 20%, then adjust for access at -15%, or 387,600, rather than give the net adjustment as zero...