Using Plus & Minus Instead Of Numerical Adjustments

[jaebert]

does anyone else use plus and minus, instead of numerical adjusments? Is there a name for this process, and when do you use it?

 

[bnmappraisal]

I believe you're referring to Qualitative Adjustments (Plus/Minus, Superior/Inferior)

I've used this for private work, but don't use it often.

 

[Mr Rex]

Its called a 2065 form.

 

[Terrel L. Shields]

I rank sales in many of my farm and mineral appraisals. Typically, I would have 5, 6, or more sales. I just used one with 31 sales. That is called "Ranking Analysis". The plus/minus method is called "Relative Comparison Analysis". I prefer ranking sales. And both are Qualitative techniques.

I think things like simple bare lot sales are best valued by that method when you have a lot of data. While pointing you to the central tendency (mean) it gives you room to adjust according to the features and how those features may be in the "higher" or "lower" range (spread) between the cheapest and most expensive.

I also tend to use it for land analysis of large tracts where I use dollars per acre as the unit of comparison. This eliminates the acreage difference adjustment issues.

 

[Mark K]

I've used it before and in the grand scheme of things, this method is probably just as credible as the standard method of "-$2,000 for lot size", etc.

The typical buyer thinks in this exact same way (talking SFR now). Anyone that's worked with buyers knows that's the case when they walk thru houses and say something like..."I like this kitchen better (+) but I like the bathroom in that second house better (-). They don't say "I think this slightly updated kitchen is worth $2,500 more than the last house" or "this house has an extra 75 s.f. that has to be worth about $40/s.f.".

 

[Michigan CG]

Qualitative analysis is the most ignored tool in the appraisal tool box. I have seen a number of appraisals that only use qualitative analysis and have written a few myself, both commercial and residential.

 

[George Hatch]

Inasmuch as it's basically the same method (albeit more a little more refined) than what most buyers and sellers actually do in their decision making it would be tough for someone to say it's not a legitimate valuation model.

Santora pointed out years ago that you can't get to quantifying an adjustment or a reconciled value within a range without first qualifying, rating and ranking the differences between these properties; so really most of our analyses include qualitative and well as quantitative analyses. Even if you aren't making any adjustments in what we refer to as a qualitative analysis you're still quantifying your results when you conclude to a reconciled value.

 

[J Grant]

The typical buyer thinks in this exact same way (talking SFR now). Anyone that's worked with buyers knows that's the case when they walk thru houses and say something like..."I like this kitchen better (+) but I like the bathroom in that second house better (-). They don't say "I think this slightly updated kitchen is worth $2,500 more than the last house" or "this house has an extra 75 s.f. that has to be worth about $40/s.f.".

I agree, having sold RE, that is how typical buyers think, though they are aware of costs and assuming well informed, they have a rough idea of what upgrades cost to put in, or what repairs cost to fix.

While it is true that buyers themselves don't make adjustments, an appraisal is more than a direct reporting of what buyers do, it is an analysis of what they do ( and how markets react to what they do). Because an appraisal is an analysis , we make adjustments for patterns of buyer and seller behavior. The buyer likes a kitchen more (because it is upgraded), market data shows most buyers paying 5k average for updated kitchens in houses of subject size/ in the area. Of course a degree of price variance has no clear explanation and that is part of the market as well.

Very small adjustments and adjustments for minor differences are too hard to extract and thus are better off addressed as qualitative factors.

I personally think an appraisal using plus and minus with narrative could be credible, but would not be accepted, at least not now, by lenders and the secondary market.

Since adjustments can be "off", referring back to the un adjusted sales prices is useful.

 

[George Hatch]

Going commando is easier when the properties are really similar to each other. Conversely, It's hard to deal with big variances in the property attributes without making adjustments.

 

[Peter LeQuire]

I often use "Superior" or "Inferior" in grids for non-GSE work. I don't think that the quantitative process we use for GSE work reflects the way most buyers of SF houses intended for owner-occupancy react to differences between properties. Someone in this forum once used the phrase "surrogate amenities" - which I've appropriated and use regularly and frequently: thanks, whoever you were.