Time Adjustments

[CGinMN]

Where do you explain that?

In the narrative. If you limit your analysis to checking boxes, then you will always come up short.

 

[Ariba]

In the narrative. If you limit your analysis to checking boxes, then you will always come up short.

So why not report consistent statistics/numbers on page 1 and explain that in the addendum? Seem to me you are providing 2-explanations, page 1, and another explanation in the addendum. Seems to be more logical to just explain it in the addendum in the first place.

 

[CGinMN]

So why not report consistent statistics/numbers on page 1 and explain that in the addendum? Seem to me you are providing 2-explanations, page 1, and another explanation in the addendum. Seems to be more logical to just explain it in the addendum in the first place.

The reason I do it this way is because this is the way the users/GSEs want it. Yes, the forms are not user-friendly, which is why so much supplemental narrative is needed. And yes, without supplemental information your report might be misleading.

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

The analysis you are using from Infosparks is helpful to understand broad pricing trends, but the adjustment for market conditions should come from an analysis of the competitive market segment if possible.

Ideally, you are adjusting for the change between the contract date of the subject and that of the comparable sales, which likely isn't a straight line, especially if you work in a seasonal market. However, sometimes a straight-line trend is the best you can do. If I adjust my comps at 1% per month, but I know that 8 months ago the appreciation was more like 0.75% and the last 3 months prices have been moving upward at closer to 1.25%, then maybe I will adjust at 1% per month, but account for the more recent price acceleration within my reconcialtion. The adjusted value of my most recent comp might be low, so maybe I'll reconcile up. You can always mix quantitative and qualitative analysis, in fact I do it quite a bit, especially when I use multiple methods to extract a single adjustment rate.

 

[Michigan CG]

Although it had/has it's shortfalls, I'm disappointed they no longer require it. At the very least, it forced appraisers to actually perform a market analysis.

That form was completely worthless in my rural market. However I agree, it did force appraisers to do some sort of market analysis. I have three pages of my addenda dedicated to market analysis.

 

[Michigan CG]

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.

I agree with what you are doing.

 

[shrubberyvaluation]

So why not report consistent statistics/numbers on page 1 and explain that in the addendum? Seem to me you are providing 2-explanations, page 1, and another explanation in the addendum. Seems to be more logical to just explain it in the addendum in the first place.

Because of Fannie Mae.

 

[sputnam]

I have no problem at all - just use MARS. You can tell it to do simple linear or non-linear for each variable, including time. I can feed in 20 years of data and it will come back with "about" the most accurate regression possible. It is just handled with all other variables.

In fact, I can get regression not just on time but on how it influences different variables, such as GLA, LotSize (large lots can become more /or less in demand over a period of 10-20 years in specific areas), bath count and so on. This is important when there are underlying trends impacting the value of bathrooms, bedrooms, garage size and so on.

You might as well learn R/earth if you want to stay in appraisal. It is just a question of time before it is required.

A perfect example of what I was saying. You want to just use MARS. Unfortunately, unless you happen to have a relatively large data set and have scrubbed the anamlous data, regression analysis isn't the best method. Fortunately, USPAP doesn't require that your opinion be right, just supported. Also fortunately, the better appraisers want to get it right.

 

[alebrewer]

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?

Actually, isn't it conflicting if you do it the way you're suggesting? If you state declining on P1, then appreciating in the MC, wouldn't that potentially be misleading?

 

[alebrewer]

That form was completely worthless in my rural market. However I agree, it did force appraisers to do some sort of market analysis. I have three pages of my addenda dedicated to market analysis.

Meh - all RE is local.

 

[shrubberyvaluation]

Actually, isn't it conflicting if you do it the way you're suggesting? If you state declining on P1, then appreciating in the MC, wouldn't that potentially be misleading?

Assuming you were doing P1 based on the neighborhood trend instead of what Fannie wants, which is just comparable properties, it would actually not be misleading. What if you have a submarket in the neighborhood that is appreciating, which is what your subject is part of, while the neighborhood as a whole is declining?