Supporting Adjustments in a Report

[Tejus]

Fannie Mae and some Clients are requesting an Appraiser provide support for adjustments in an appraisal report. The following is a GLA Adjustment explanation included in a recent appraisal report I'm reviewing:



I commend the author for attempting to meet the Fannie Mae / Client requirements, but the explanation is complete crap.

I'm not sure what instructors/classes/statistics are advising appraisers to include in their report to address the Fannie Mae / Client requirements, but I hope the above is not it . . .

 

[Michigan CG]

............ but the explanation is complete crap. . . .

It is a boy scout's try.....most boy scouts are 10-14 years-old.

 

[LordofTexas]

He clearly used the well established PFA method.

 

[Ms. Janet]

Amazingly, I just talked to an Appraiser who was adamant about using a similar method. She said she takes the purchase price and divides it by the number of characteristics a buyer considers; such as site, GLA, condition, pool. Then takes that percentage for the adjustment . She calls it marketability analysis or modified marketability analysis if she modifies the percentage. Somewhere on the Internet this bizarre method is being taught . Incredible

 

[J Grant]

Amazingly, I just talked to an Appraiser who was adamant about using a similar method. She said she takes the purchase price and divides it by the number of characteristics a buyer considers; such as site, GLA, condition, pool. Then takes that percentage for the adjustment . She calls it marketability analysis or modified marketability analysis if she modifies the percentage. Somewhere on the Internet this bizarre method is being taught . Incredible

Unreal. Who are these people, how did they manage to get a license and why do clients hire them?

 

[Meandering]

Adjustments were extracted from the market data. The analysis utilized bracketing and sensitivity. The adjustments made, most minimized the differences between the comparables when compared to the subject. The unadjusted raw sale prices of the comprables ranged by 12%. The adjusted sale prices range of the comparables is less than 1%, validating that the adjustments are those that most minimized the differences between the comparables when compared to the subject, which, is the point of making adjustments. The adjustments are supported by the comparables used in the analysis.

Have a nice day.

.

 

[J Grant]

Good explanation Marion, honest and to the point. When the comp choices are good and the key elements are bracketed, the adjustments do flow right from the comps themselves and minimize differences between properties. Of course other sales and listings are reviewed and that informs the adjustments as well but basically the sensitivity analysis performed on the comps in grid show the adjustments indicated by market.

 

[Michigander]

It sounds like the appraiser was trying to extract land value from each of the sales and apply the residual as an adjustment basis. For example, if price per square foot remaining for the entire improvements was $100 and 70% of it relates to gross living area (the base structure without regard to basement, garage, etc). then that is what they are applying it to? Communication skills are lacking, but maybe that was the intent? Not sure really.

 

[J Grant]

The excess inferior or superior sf of a comp compared to subject $ amount is proximate market reaction to contributory value of that sf, not cost and not $ for $ the whole a formula of the whole sf after land is subtracted. In many instances minor sf differences see no market reaction anyway.

 

[Terrel L. Shields]

I wonder what ever happened to "the book" (not "the list")? You know. The one that talked about things like the cost approach? Paired sales? Extraction? Didn't everyone take something like "Basic Real Estate Appraisal", "The Art of the Real Estate Appraisal", "Fundamentals of Residential Appraising", :The Student Handbook of Residential Appraising"... something basic? Where do people get this crap?