Sequence of Percentage Adjustment in the Sales Comparison Approach

[Ken B]

1) Property rights (Fee simple, leased fee, leasehold)
2) Financing (adjust for cash equivalency)
3) Conditions of sale (not property condition, but undue influences on buyer or seller, non-arms length transaction)
4) Expenditures immediately after the sale which the buyer knew would be incurred (actual cost of acquisition-buyer knew roof needed to be replace immediately? This is a cost of acquisition.)
5) Market change (values appreciating, depreciating, or both since sale)

Each of the above adjustments are made individually with an adjusted sale price subtotaled after each adjustment.

Any adjustments for the following considerations are added prior to deducting from previous adjusted sale prices with the net result being a final adjustment applied to the adjusted sale price indicated by the subtotal following item 5) above.

6a) Location
6b) Condition
6c) Economic factors
6d) Use
6e) Non-realty items

 

[Vegan702]

You guys are making a GREVIOUS mistake if you think trainees know or are familiar with the grid. In all the BE I took I never saw a full printed out form. The closest they come in the test books we used is just little portions of them presented out of context.

Its a HUGE flaw in the BE IMHO that you never have to handle and work with the forms.

You don't ever see the form for a reason, they don't want you to be trained to fill out a form. If you don't know how to do the appraisal, filling out the report is meaningless. Once you know how to appraise, then filling out the form is easy.

 

[ZZGAMAZZ]

KENB: Sincerely speaking your rationale in Post# 11 appears to be very concise and well-thought, but...there would not appear to be a difference in the final value regardless of the sequence, unless you are using percentage rather than absolute dollar adjustments. I appreciate your insight and would like to know more about your perspective because it's obviously based upon an intelligent decision. Pls let me know more if I'm missing the point entirely & thank you.

 

[Ken B]

KENB: Sincerely speaking your rationale in Post# 11 appears to be very concise and well-thought, but...there would not appear to be a difference in the final value regardless of the sequence, unless you are using percentage rather than absolute dollar adjustments. I appreciate your insight and would like to know more about your perspective because it's obviously based upon an intelligent decision. Pls let me know more if I'm missing the point entirely & thank you.

The thread title is "Sequence of Percentage Adjustment in the Sales Comparison Approach." As you qualified your comment/question with "unless", I have to guess you know why the adjustments are made in the order described.

 

[ZZGAMAZZ]

Do you do it manually using the grid? I asked ACI last year whether it was an option and was told "No," although that confused me because it appears to be the logical alternative if the sequence is meaningful.

Do you feel that yours is a relatively atypical approach regardless of the wisdom?

 

[Ken B]

Does one do what manually using the grid? It has been awhile since I have used a form, and to be honest, I forget how forms handle the adjustment process. If they do not permit entry of a percentage, it would be necessary to calculate the whole number adjustment separately prior to entry.

The sequence of adjustments I presented is "THE" approach. There are no others. If one makes whole number adjustments, use the same sequence so as to avoid confusion.

 

[Rational Estimation]

Sequence of Percentage Adjustment in the Sales Comparison Approach

Does anyone know the proper sequence of percentage adjustment in the sales comparison approach? I have been using two different sources to prepare for my AT test next Saturday; however, the two sources are providing different adjustment techniques.

The first source is from a book, I’m hoping most of you are familiar with, called “QUESTIONS & ANSWERS” by Fisher and Tosh, and the second is from a software program that I was told is the best, “CompuCram.”

-"Questions & Answers" book- financial, conditions of sale, market conditions, location, and physical adjustments are all adjusted seperately for question number 8 on page 67.

-"CompuCram"- The Location and Physical adjustments are not seperate but net adjustments, questions “Exam-471”, “Exam-495” and “Exam-497.”

Can someone please help? :Eyecrazy: I want to pass my test, and I calculated a difference of almost 20K between the two different techniques on one question.

Thanks- Nick

I received a scaled score of 89 last Saturday on my trainee exam. It took time and energy to find the correct sequence of adjustment for percentage adjustments. Even though I may never use this technique, it was helpful to know as I breezed through the questions pertaining to it. - Thanks Ken

 

[ZZGAMAZZ]

Rationale, Better check with Ken B before doing any residential form appraisals. Sequential percentage adjustments is THE sole alternative. . . in an industry where virtually nothing is definitive...

 

[Ken B]

Why would Nick need to check with me?

Since I detect a little sarcasm, perhaps it would help if I identified that I hold a residential designation awarded by one of the major professional organizations and I did nothing but residential work for 16 years before moving to the commercial side. I could continue to qualify myself, but it would be a moot point.

The sequence provided by me in an earlier post is the only acceptable method of performing percentage adjustments. If one of the items noted is not applicable to solving the problem, in any reporting format less than Self-contained, it would not be necessary to include specific consideration of that item. For consistency purposes, if making whole number adjustments rather than percentage adjustments, one should use the same sequence.

But if you want to do it your way, be my guest. Just make sure you take off your shoes when you enter the house.

Edit: You are welcome Nick. Congratulations on the exam. By the way, I used the the proper sequence for percentage adjustments on a comp grid earlier this afternoon and will probably use it again later this week.

 

[ZZGAMAZZ]

Ken B: I think that yours is the ideal approach, indeed. But if so, why doesn't ANYBODY do it? I mean NOBODY NOWHERE. The standard software doesn't offer that option. To calucluate the adjustments manually in the form approach would be feasable but how many page(s) of narrative explanation would be required to explain the approach to a lender when the remaining 99% of appraisals are done with each line item calculated, absolutely, relative to the selling price, rather than sequentially and relative to the revised net adjustment.

I agree with you in principle that the method you proffer is THE only way to make adjustments appropriately, although I am unable to explain why it ISN'T DONE by ANYBODY EVER.