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Sq.ft'age Adjustments

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Valueseeker

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May 19, 2016
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Certified Residential Appraiser
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Massachusetts
Capture.JPG
at 40.sq.ft

20.JPG
at 20. sq.ft.

60.JPG
at 60.sq.ft

These three are spread out by $20. to illustrate what i'm trying to say. What I typically do is select the values (I will test and test) until the difference is the smallest between the highest and lowest adjustment. (in this case its $40.00)

This has usually offered me a great guideline. I dont have to test so many numbers because i know what ball park each area is roughly around.

My question is do many of you go by the number that will produce the smallest difference (assuming you are bracketed in GLA) or do you just use what you feel is in a particular area?

Thanks
 

Valueseeker

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Certified Residential Appraiser
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Im sorry I didnt put in in the above but when i am referring to differences, Im referring to the differences in the adjusted values not the differences in those lines above.
 

J Grant

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Certified Residential Appraiser
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Florida
When making adjustments on the grid, the amount that brings about the least differences among the comps (smallest range of adjusted prices) is usually best, but it has to be measured in context with market and area data.
 
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Mr Rex

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State
North Carolina
Yes. its called sensitivity analysis. As you change the adjustment the larger and smaller houses values will converge and eventually cross the axis. The adjustment that provides the exact point of crossing would typically be the most appropriate number, assuming all other adjustments are likewise the most reasonable.
 

Restrain

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Florida
This is why the 'book' number is not set but variable. It has to be tested against the market (regression analysis).
 

Meandering

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Real Estate Agent or Broker
State
Pennsylvania
My question is do many of you go by the number that will produce the smallest difference (assuming you are bracketed in GLA) or do you just use what you feel is in a particular area?

Yes. The entire point of making adjustments is to minimize the economic differences between the subject and all the comps.
 

Tom Woolford

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Nov 20, 2005
Professional Status
Certified Residential Appraiser
State
Florida
I typically won't even adjust for small differences in GLA. When I do, I'll find a starting point by paired sales or aggregate sales analysis, and then refine it on grid by sensitivity analysis (what you are doing). Sensitivity probably would be enough, but I like to include a broader market overview to make sure my sensitivity analysis is both credible, and supported in the market.
 

J Grant

Elite Member
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Professional Status
Certified Residential Appraiser
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Florida
Same here. I often will put a stop of adjusting within X sf on sf adjustment, and in lot size variations, I often see no market reaction between an 8700 sf lot and a 9500 sf lot, for example.

What's exhausting about it is having to constantly explain, over and over, why we made no adjustment for such minor differences...and then the rote/literal minded appraisers do adjust for them,(or auto populate adjustments ) making us answer in some CU cases why WE didn't do the same.
 

Michigan CG

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Michigan
There are so many good things about this thread. First of all sensitivity analysis is a form of matched pairs. It can be used for many things, not just GLA but GLA is the most common.

If all other adjustments are done "correctly" then the GLA sensitivity analysis should pin-point the appropriate GLA adjustment.

I have a spreadsheet that I obtained from another appraiser years ago (I can't remember who to give him credit). The spreadsheet can save a bunch of time as it tells you the appropriate adjustment.

Some times the speadsheet does not work because there is an outlier that messes it up. Let us say you have six comps and the spreadsheet tells you the adjustment minimum spread is $25,000. Take the one outlier out and use the spreadsheet using five comps instead.

Here is an example where the indicated adjustment would be $59/SF. I would round to $60.

upload_2016-9-25_12-10-4.png
 
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