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Rate of Decline/Adjustment

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Sophie Grace

Thread Starter
Freshman Member
Joined
Jan 28, 2008
Professional Status
Licensed Appraiser
State
Texas
Can someone help me to calculate rate of decline and translate into adjustment on the grid? I understand to research past 12 months/compare to previous 12 months, etc....but don't know the exact formula.

Thank you!
 

Metamorphic

Senior Member
Joined
Mar 15, 2008
Professional Status
Certified Residential Appraiser
State
California
That's really something your supervisor should be teaching you and overseeing your calculation of. There are as many ways to do it wrong as there are to do it.

That is doubly true if you're at the stage in your learning where you need someone to feed you a formula to calculate a rate and apply it to a comp.
 

Al Location

Freshman Member
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Nov 18, 2008
Professional Status
Certified Residential Appraiser
State
California
(1-Current 12 months value/prior 12 months value) * 100 yields a percentage. You'd typically divide that by 12 for a monthly rate of decline. Of course, decline is not linear, but it's cleaner and easier to explain in the report.

Example: 1-$180,000/200,000 = .1 * 100 = 10%.
 

Al Location

Freshman Member
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Nov 18, 2008
Professional Status
Certified Residential Appraiser
State
California
What meta said. See if there are some "shop rules."
 

Sophie Grace

Thread Starter
Freshman Member
Joined
Jan 28, 2008
Professional Status
Licensed Appraiser
State
Texas
so if i have a monthly decline rate of 6.43%, how do I translate into a grid adjustment (lender requirement) ?
 

Al Location

Freshman Member
Joined
Nov 18, 2008
Professional Status
Certified Residential Appraiser
State
California
Newbie55, you sent me a PM, but you have yours turned off.

Let's just say you have a 24% rate of decline in the past year. That's 2% per month. Strictly speaking, you should start that clock when the comp went into escrow, since that's when the offer was tendered and buyer and seller had a meeting of the mind. For a three month old comp, it's just 2% times 3 months times the sale price (minus any seller concessions of course). On a $100,000 sale, you make a negative 6% adjustment on that example, or $6,000.

S'okay?
 

toddmallard

Junior Member
Joined
Oct 4, 2007
Professional Status
Certified Residential Appraiser
State
Georgia
Al. It may be cleaner, but say goodbye to your licence here in Fla. Prove the adjustment, not just make it easier to expain.

You should know better. See USPAP 2-1 about mis-leading the reader.
 

Al Location

Freshman Member
Joined
Nov 18, 2008
Professional Status
Certified Residential Appraiser
State
California
Todd, of course I'm presupposing for the sake of this discussion the underlying rates are provable. I don't know anyone using appraisal reports with a stated annual market decline of 24% that does not want that interpolated at 2% per month. If you have raw data that says 1.9% in month X and 2.1 in month y and you apply your adjustments accordingly, I'd sure like to see your addenda explaining that.

Have a nice day.
 

Michigan CG

Moderator
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Joined
Nov 1, 2006
Professional Status
Certified General Appraiser
State
Michigan
Al. It may be cleaner, but say goodbye to your licence here in Fla. Prove the adjustment, not just make it easier to expain.

You should know better. See USPAP 2-1 about mis-leading the reader.

Come on Todd, that is common appraisal practice the way Al explained it. It is clear and concise.
 

leelansford

Elite Member
Joined
Mar 29, 2002
Professional Status
Certified Residential Appraiser
State
Illinois
Beware of basing adjustments for movement in housing prices from one period to another based upon the movement in average and/or median sold prices unless the stock of housing is EXTREMELY homogeneous.

Think about it.
 
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