Qualitative Adjustments

[Stone]

A "qualitative adjustment " is really no adjusment, correct?

It's a read on market reaction that informs an appraiser's judgement how they weigh or rank , or consider information, a comp, or a features of a property , that supports why they opine at a higher, lower, or mid range of value .

You’ve asked a similar question before and I thought had a handle on it after a couple people weighed in. Sales can be adjusted through qualitative or quantitative adjustments. Just because someone is using descriptors like superior or inferior, or something like +/- doesn’t mean there is “really no adjustment”. It just means it isn’t a quantitative adjustment.

 

[Terrel L. Shields]

Much of what I do is limited information of mineral interests. So my tendency is to try and get 7 or more sales, up to 20. I rank them, then I compare the subject to the most similar ones, and why I think they are representative. In minerals proximity counts but similarity of geological conditions and proximity to active drilling are primary factors. I am working on a retro report for 1988. That's pre-fracking and the drilling targets were different. If I had not been working that area routinely from 1979 thru 1991, I wouldn't tackle it. But I have geological info from those days and recall the lease bonuses at the time.

 

[glenn walker]

Adjustments: A qualitative Adjustment ? I Better add this to my new menu and cheat sheet !

The appraiser employs a market-based system that relies upon the results of matched pairs when available and a percentage-based system accompanied by sensitivity analysis and " qualitative-adjustments " to assure the amounts that are reconciled in the market to the Subject property were neither greater or less than the market called for and would support. *** Gee- I have no idea what this means but I thought it sounded good

 

[J Grant]

Fwiw, I believe "qualttative adjustments , should instead be called "qualitative ranking", since there are no numerical adjustments made. I understand the concept, put a plus or minus or inferior or superior next to a comp as compared to subject, but why is that an "adjustment"? Its a demonstration of the appraiser's comparative judgment and ranking . I just think having the word "adjustment" in there is confusing to

It should be "a numerical adjustment was made/ or no numerical (0) adjustment was made , or a qualitative ranking was made..

I apply qualitative in narrative rather than putting a plus or minus or inferior/superior on a grid - as long as the reader understands what is done and how it contributes to the reconciliation, whatever is acceptable/supportable.

 

[Gobears81]

One method that I've had some luck in doing is showing qualitative adjustments in the report and retaining a quantitative adjustment grid in the workfile. Sometimes qualitative and quantitative can suggest different conclusions, and it is good to know why they might differ. Or, say that the gap between the highest sale that is overall rated as "inferior" and the lowest "superior" sale is quite wide, yet quantitative suggests a central tendency that is at some point in that range, it offers an additional layer of support.

I've been told by multiple appraisers that qualitative is the best method to use when in an intended use that might result in testimony. In Illinois, a high percentage of ad valorem appraisals are based on qualitative for that reason. R/W appraisals in IL don't seem to have the same percentage of qualitative adjustments, despite their potential for litigation. Personally, I have never been questioned on a quantitative adjustment when giving testimony, but the preference towards qualitative in this setting still makes sense

 

[Terrel L. Shields]

As Lenin said, "Quantity has a quality of its own." when talking about the state of the Russian Army.

"Quantitative" methods go beyond one dimension. It can be a Ranking analysis or it can be some relative comparison, superior/inferior/equal assessment. Totaling those for instance. And interview/polling other professionals is a 'quantitative' method.

 

[Stone]

Fwiw, I believe "qualttative adjustments , should instead be called "qualitative ranking", since there are no numerical adjustments made. I understand the concept, put a plus or minus or inferior or superior next to a comp as compared to subject, but why is that an "adjustment"? Its a demonstration of the appraiser's comparative judgment and ranking . I just think having the word "adjustment" in there is confusing to

It should be "a numerical adjustment was made/ or no numerical (0) adjustment was made , or a qualitative ranking was made..

I apply qualitative in narrative rather than putting a plus or minus or inferior/superior on a grid - as long as the reader understands what is done and how it contributes to the reconciliation, whatever is acceptable/supportable.

It seems pretty clear that you don’t actually understand the process as well as you think you do. For some appraisers who have only used the quantitative adjustments it is difficult to get their heads around using the other method, or why people would use them. Concerning yourself with whether or not people use the term “adjustment” kind of shows a lack of familiarity and comfort with it.

Edit - I’m not arguing for qualitative adjustments, though virtually all my reports are done that way. Do what works best for you. But don’t fall into the trap of thinking only dollar amounts across the grid equals adjustments.

 

[J Grant]

It seems pretty clear that you don’t actually understand the process as well as you think you do. For some appraisers who have only used the quantitative adjustments it is difficult to get their heads around using the other method, or why people would use them. Concerning yourself with whether or not people use the term “adjustment” kind of shows a lack of familiarity and comfort with it.

Edit - I’m not arguing for qualitative adjustments, though virtually all my reports are done that way. Do what works best for you. But don’t fall into the trap of thinking only dollar amounts across the grid equals adjustments.

I made that comment for the purpose of this thread- you are free to disagree with it !
I use "qualitative" adjustments, ( or ranking ) in appraisals in addition to, or to supplement the quantitative adjustments, or when no adjustment made show the feature was considered qualitatively.

Unless every response you make is going to be personal, - as a topic, why do you believe the word adjustments should be used for "qualitative adjustments ?" Since they are really rankings of plus/minus/ inferior/superior. Appraisers consider that constantly, even if they do't write the ranking symbols in., Of course the rankings will have at some point a numerical expression in the value reconciliation. but it avoids making an individual numerical line adjustment on it.

I understand that for non lender /other purpose appraisals qualitative is the norm because it suits the use and purpose. Be that as it may, the market does indeed make "adjustments " for key factors and they are numerical (price ) - where a buyer pays more for positive/beneficial factors and less for defects/adverse factors.

 

[Ariba]

Would anyone share an example of what a grid looks like for a qualitative appraisal? Do you just override the number format and use either - , + or inferior/similar/superior or positive/neutral/negative. Do you mix -/+, etc and with numbers? Is the appraisal report still UAD compliant?

 

[Basically Rectangular]

Reading some of the replies, it seems that I use qualitative descriptions in my commentary and reconciliation to discuss the use of some applied quantitative adjustments.

I actually recently did something remarkable, which was to reference my copy of "The Appraisal of Real Estate" 13th Edition on this subject. What I gathered was that quantitative adjustments should be attempted first, if there is supporting sales data. Then I found nice examples of how to narrow a range when determining quantitative adjustments by applying qualitative analysis. It seems like applying qualitative techniques to your analysis and workfile can offer excellent support for certain quantitative adjustments applied.