Time Adjustments

[Ariba]

How would you adjust for a dated sale? Say a February, June, and October dated sale? Straight line, range of months with rapid appreciation? What about the October sale when the market appeared to be stable. It does not appear the straight x% would not be accurate. This is the same market, 3-month rolling trend versus 12-month rolling trend

 

[CGinMN]

Correct

Wrong. Do you use the same rationale when completing the One-Unit Housing (Price/Age) boxes do you only use the comparables? How about the present land use? Seems it to me you are misleading the reader by mixing market and comparables statistics in the neighborhood section. The "Neighborhood" is about the market and not about the comparables.

 

[RCA]

I am admittedly not as well versed as you with respect to statistical analysis, but wouldn't using a data set of 20 years potentially produce a time adjustment regressor that is 'smoothed' over that 20 year period, thus resulting in a regressor that might, or might not, reflect current trends?

For a period like twenty years you would want to use non-linear. MARS is segmented linear - which overall is non-linear. It will decide the best points in time to break a given linear relationship or time-value slope and start a new one. By going back in time you have more different kinds of houses in your pool of comparables - and thus more information or intelligence upon which MARS can construct a price model.

Time adjustments really require special treatment. They can be dangerous when using extrapolation past known values - such as when heading into a period of stabilization or reversal.

 

[alebrewer]

View attachment 59167

Never seen it presented like that before. I like it.

 

[Joe Flacco]

The forms should be made more consumer friendly if they are being provided a copy of the appraisal.

 

[alebrewer]

How would you adjust for a dated sale? Say a February, June, and October dated sale? Straight line, range of months with rapid appreciation? What about the October sale when the market appeared to be stable. It does not appear the straight x% would not be accurate. This is the same market, 3-month rolling trend versus 12-month rolling trend

Yeah - it can get hairy. I tend to use straight line over a particular time period. Say the market fluctuated up for 6 months at 1%, 2%, .5%, 3%, 2%, 3%, but then was stable for 3 months. Comp 1 contracted 6 months ago, comp 2 contracted 2 months ago. The 9-3 month period shows a average appreciation of ~ 2%/month, with the 3-0 month period being stable. I'd adjust comp 1 at 6% (2%/month for 3 months, and 0% for the current 3 months), and Comp 2 at 0%. Remember, too, that concessions and market adjustments are the only two that are absolute - IOW, they're not relative to the subject. IMO, that makes them the easiest adjustments to extract/apply.

That's just me, though.

 

[shrubberyvaluation]

View attachment 59167

Correct. I can't believe they could of made it more friendly for a user of the report. Even if the appraiser explains all of this it still makes it more confusing.

 

[Tom4value]

What do you base your time adjustments on for dated sales? Simple answer, what does the market tell you? However, the answer is not that simple. It depends on what chart you use and the time adjustment could vary significantly. For example the month-to-month show a declining market starting in December, the 3-month rolling trend shows basically a stable market, the 6-month rolling trend shows 2.5% appreciation for the months of April, May, and June, and the 12/month rolling trend shows 1% appreciation for the year. Do you adjust for dated sales in a straight line, based on the yearly trend, no matter when the sale occurred, or do you base the adjustment on the % of when the sale occurred? Lastly, what box do you check, declining, stable, or increasing?

Your post is very correct in that you are talking about changes in the market. Other posters here answered you question. My point is in your report, call it “market” adjustments and not “time” adjustments. Something I learned in one of my classes.

 

[CGinMN]

Never seen it presented like that before. I like it.

Not my creation, but I got it from a reputable source.

 

[Ariba]

Not my creation, but I got it from a reputable source.

You covered your bases, however, that raises the question of what is happening in the market as a whole. The comparables might be declining in the market, but the market as a whole might be appreciated at 1-2% per month. So the Stable, Increase, Declining boxes would be in conflict and therefore misleading. I believe UPAP would say that is misleading. Where do you explain that?

I personally would still report the market as a whole on page #1 and put an explanation in the addendum to satisfy the Fannie Mae requirement.