Qualitative Adjustments

[Andrei Fin]

I've made an excel spreadsheet with just the major features, none of that fireplace bs, and just wrote the word Superior, Inferior, or Similar as the adjustment. You can also add the Slightly modifier. This is in no way UAD compliant, it's for non-lending work.

 

[Mejappz]

I like to rank or rate the property as a whole. Instead of using +/- for each property characteristics(although I have done it that way as well). And then just comment in your reconciliation.

 

[number1pencil]

Why not just use 5% adjustments for everything like everyone else

Illinois appraisers love qualitative. They load up a sales grid with superior and inferior adjustments and use commentary to reconcile. Most other markets I see will only use qualitative when there is limited data.

 

[WestMichiganCG]

Currently I'm working on a grid where I have great data for quantitative adjustments for time. I had multiple sales of similar condo units in a large development and I showed that units in a certain size bracket were increasing at a rate of approximately 3% per year for the time window I was observing. Large data sets with a significant sample size allow for quantitative adjustments. Things like overall quality of a building can be qualitative. If I know a sale is superior to the subject in overall quality and I have a small dataset I might adjust -20% as a qualitative adjustment. In an Appraisal Institute Class, I was taught not to show my -20% adjustment and just write superior with the calculations kept in my work files. When I finished my MAI I was dinged on qualitative adjustments for not showing the %. Enough reviewers have kicked reports back that I typically put adjustments as a % in my grid. Another lender says it's wrong to do it that way so I would put Superior on my grid for a qualitative adjustment and percentages for quantitative adjustments. I write narrative reports so I just explain where I came up with the adjustments. Sample size is important though, if you pull two blue gumballs from a truck full of gumballs; saying they're all blue is inferring a lot from a little.

 

[Andrei Fin]

In the book Down to Earth (1985) Sanders A. Kahn, Ph.D., SREA makes the following statement about Comparative Sales Grids:

“…it became fashionable for some appraisers, with the encouragement of some public agencies, to rate the degree of variation between the subject property and comparative sales. Quantification of the variations, usually by the use of a plus or minus percentage (or dollar amount) from the comp to the subject, became the vogue.

Actually this method is replete with danger. It looks so scientific, but in realty is only pseudo-scientific and converts subjective judgment into what pretends to be objective mathematical absoluteness.”

 

[NachoPerito]

You don't need 'support' for a qualitative adjustment. If you are confident that a characteristic is superior, but is difficult to quantify then you will likely not be questioned.

I use qualitative adjustments when I am unable to quantify something with data in the market.

It is easier to do qualitative adjustments, but you should only use it when adjustments can't be quantified because a qualitative adjustment isn't weighted. For example, you could say 'superior' for quality of view and 'inferior' for number of bathrooms.... They would cancel each other out right? But in reality, the view amenity is worth $200k and the bathroom is only worth $2k... so qualitative was a big mistake and likely misleading in this scenario.

 

[NachoPerito]

Currently I'm working on a grid where I have great data for quantitative adjustments for time. I had multiple sales of similar condo units in a large development and I showed that units in a certain size bracket were increasing at a rate of approximately 3% per year for the time window I was observing. Large data sets with a significant sample size allow for quantitative adjustments. Things like overall quality of a building can be qualitative. If I know a sale is superior to the subject in overall quality and I have a small dataset I might adjust -20% as a qualitative adjustment. In an Appraisal Institute Class, I was taught not to show my -20% adjustment and just write superior with the calculations kept in my work files. When I finished my MAI I was dinged on qualitative adjustments for not showing the %. Enough reviewers have kicked reports back that I typically put adjustments as a % in my grid. Another lender says it's wrong to do it that way so I would put Superior on my grid for a qualitative adjustment and percentages for quantitative adjustments. I write narrative reports so I just explain where I came up with the adjustments. Sample size is important though, if you pull two blue gumballs from a truck full of gumballs; saying they're all blue is inferring a lot from a little.

View attachment 40986

I am confused.... did you show that 20% adjustment in the report? If you did, then it isn't qualitative ...

Sometimes I will adjust something 20% in my own notes and put a qualitative adjustment in the report 'superior', but in the reconciliation I will have that 20% adjustment in my head because I have some confidence that it is around that number.

My grids look like this sometimes with quantitative adjustments first and qualitative after that. This helps me in the correlation.

 

[andrew81]

i recently read a 289 page very detailed, well written, and beautifully formatted commercial narrative report. the sales comparison was fully contained on 1 page with a 10 point grid of comparison each given a +, -, or =, followed by two sentences of explanation lol

edit// there were 4 sales used, each was in a different city, and each one had like 6 pages of detail describing the property and its market. just saying, the part that really matter was minimal lol

 

[Stone]

Why not just use 5% adjustments for everything like everyone else

Illinois appraisers love qualitative. They load up a sales grid with superior and inferior adjustments and use commentary to reconcile. Most other markets I see will only use qualitative when there is limited data.

I don't think it is particularly specific to any geographical area, but to types of appraisal work. Outside of the lending world, I'm guessing it is more common than many here think.

 

[Stone]

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.

Who said your grid cannot include both? If I have good data on something that makes sense to do a quantitative adjustment I will and then I will place the qualitative adjustments in the grid below the quantitative ones. But, that said, the bulk of my adjustments are qualitative and I'm guessing due to the different types of work we do, we have different ideas about what qualifies as "good data" to be used quantitatively. That isn't a slight, it simply reflects the different amounts and type of data available in different appraisal scenarios.

To your question - I believe they are "adjustments" because you are still adjusting the sales to the subject, just not with numbers. I also believe they are "adjustments" because anyone who does appraisals using a grid with qualitative adjustments generally calls them "adjustments". If you have something you can cite that says that only quantitative adjustments are to be called "adjustments" I'll take a look at it.

FTR -the only reason I was "personal" about this (I wouldn't characterize it as such, but so be it) is because I, and others, spent a fair amount of time discussing this with you in another thread not that long ago and I thought it was a fairly reasonable discussion. However, it seemed nothing stuck when you threw some of the same things out again here. It isn't worth having the same discussion over and over, IMO. Others may enjoy that, so have at it. No worries.