Qualitative/Relative Comparison Analysis

[nutzy]

I recently read an article in the "Working RE" magazine, written by Bryan Reynolds who is an AQB Certified USPAP Instructor.
The article is about making adjustments more in line with the buyers of
real estate, therby making qualitative adjustments instead of a quantitative adjustment, ie similar/inferior/superior, instead of using a dollar amount adjustment for a fireplace, garage etc.

I emailed Bryan to ask how did this hold up with his peers or UW in terms of being reviewed. I have yet to get a response. If anyone has read the article or uses the qualitative/relative comparison analysis, could you please tell me how this stands with your peers, and other powers that be?
Is this easily defended? Thank You in Advance.

 

[Abester]

I know Bryan, but I have not read the article. I have used qualitative analyses for years with no problems. It is easy to understand and does not rely on hocus pocus adjustments.

 

[Y-TOWN]

I have used qualitative analyses for years as well.

The only problem I've had was with one local bank's CG reviewer. He told the loan officer and loan committee my appraisal was not an appraisal as it had no percentage adjustments on the grid.

It took a little while to get that straightened out. I get very little business from that lender now.

 

[Abester]

That reviewer needs to go back to school. I used qualitative analysis in my demo.

 

[Michigander]

If explained adequately and succinctly, even the most dense reviewer should be able to understand this method. I use it almost exclusively and I honestly believe it most accurately reflects the actions of market participants.

 

[Lee Lansford]

I recently read an article in the "Working RE" magazine, written by Bryan Reynolds who is an AQB Certified USPAP Instructor.
The article is about making adjustments more in line with the buyers of
real estate, therby making qualitative adjustments instead of a quantitative adjustment, ie similar/inferior/superior, instead of using a dollar amount adjustment for a fireplace, garage etc.

I emailed Bryan to ask how did this hold up with his peers or UW in terms of being reviewed. I have yet to get a response. If anyone has read the article or uses the qualitative/relative comparison analysis, could you please tell me how this stands with your peers, and other powers that be?
Is this easily defended? Thank You in Advance.

If you're asking because you want to use this approach in your appraisals that are communicated using Fannie's current forms, you'd be asking for headaches.

 

[Michigander]

If you're asking because you want to use this approach in your appraisals that are communicated using Fannie's current forms, you'd be asking for headaches.

You can (and should IMNSHO) use it in the reconciliation of the SCA approach if you think it is going to be an issue with underwriting. And it would be on the unadjusted sales prices, not the adjusted sales prices. I would imagine it would meet resistance from underwriting, but a reviewer who can read should be okay with it if it is well reasoned and communicated.

 

[George Hatch]

If you're asking because you want to use this approach in your appraisals that are communicated using Fannie's current forms, you'd be asking for headaches.

Fannie's 2065 form uses a qualitative (only) analysis. It can't be all bad.

I don't see what the big deal is - most appraisals and most appraisers use a combination of qualitative and quantitative analysis. We generally rate the subject's attributes and compare them on a qualitative basis before quantifying the adjustment. Sometimes we make a distinction qualitatively and don't quantify any adjustment.

Then we reconcile our value indicators to our subject as a whole, giving more weight to the ones that are (on a qualitative basis) more comparable to our subject and less weight to the ones that are less comparable.

I think acceptability is going to come down to how well you can explain what you're doing and whether your readers can read for content rather than for dogma.

 

[George Hatch]

Incidentally, if you're planning on using qualitative (only) methodology on a regular basis one easy way to condition your readers to it is to mention your usage of it in combination with your quantitative analysis on everything else you do. That way it won't be a foreign concept when you do use it.

 

[Vegan702]

If for Fannie isn't this against their regulations to use qualitative instead of quantitative in accordance with sec. XI, 406.03 of the selling guide? I think when one responds to a question on this board, you should state how you are using a certain technique, otherwise some may not know it may go against what is accepted by certain clients. Since 3 of 5 posters are CG, I assume they use this more in commercial work then in residential and if in residential not in Fannie work.

Sec Xi, 406.03;
Our appraisal forms require the appraiser to use a quantitative sales comparison analysis in which he or she assigns a dollar value to reflect the market’s reaction to any features of the comparable sales that differ from those of the subject property. The proper selection of comparable properties minimizes both the need for, and the size of, any dollar adjustments. However, when there are no similar or truly comparable sales for a particular property—because of the uniqueness of the property or other conditions—the appraiser must select comparable sales that represent the best indicators of value for the subject property and make adjustments to reflect the actions of typical purchasers in that market. Dollar adjustments must reflect the market’s reaction to the difference in the properties, not necessarily the cost of the difference. Swimming pools, electronic air filters, intercom systems, elaborately finished basements, carpets, and other special features generally do not affect value to the extent of their cost.