Adjustment Values, Frequency & Dollar Amount
Ever wondered what other appraisers are doing with adjustment values?
Have you ever wondered what other appraisers are doing with adjustments in their reports?
CoreLogic has done research over the past 3 years, using 1.3 MILLION+ reports, and has produced the graph attached here. You may want to print this for reference.
This graph shows the percentage of time a certain feature is adjusted, and the average dollar amount of the adjustment for each of those. It’s rather interesting.
The highest amount of adjustment, approximately $14,000, is for the Quality Rating. Not really surprising as to the amount, but the percentage of time it’s adjusted is about 20% of the time.
Next highest is Overall Condition, at approximately $12,000, adjusted about half the time. Makes me curious if appraisers really understand the difference between Condition and Quality.
Third highest is Location, adjusted about 15% of the time, and receives about $10,000. Jeepers! Are they correct comparable sales being used if it’s necessary to adjust that much??
A lowest item, in terms of adjusted amount, is Age, at about $1000. But that adjustment is made about 25% of the time. The graph does not have an entry for Effective Age, but that might be one of the 3 ‘Other’ categories which have adjustments ranging from about $3,000 to $5,000 – with Other #1 made 60% of the time.
Other low dollar adjustment features are Porch & Deck, made about 55% of the time, for only about $1,000, and Heating & Cooling about 25% of the time for $1,000.
The real question here is why are $1,000 adjustments being made for minor items? What percentage of $250,000 is $1,000? Answer = 0.4%. Which means it’s a pimple on an elephant’s butt. Can you REALLY justify making that adjustment with market evidence??
Frankly, I hardly ever make adjustments for these ‘low ticket’ items. It’s not worth the effort to assemble the proof, in case a forensic reviewer (of which many exist these days) demands an explanation. And it’s not always possible to determine the size, condition or quality of comp features you are attempting to adjust.
Most appraisers just do adjustments by rote, because that’s the way they were trained, and they’ve never thought beyond what was presented when working as a trainee. Nowadays, with the CU, AQM and a host of other review programs you don’t even know about, that’s dangerous territory.
In case you are wondering, the various ‘regression’ programs DO NOT itemize these kinds of minor items. They might approximate the item(s) value, and generally will include that in the GLA adjustment, because it is the largest, and most easily determined adjustment amount.
Just because there’s a description on the grid, and an associated adjustment field, does not mean that an adjustment MUST be made. In fact, you probably should not! Unless of course, you have back up data. These minor items can be factored into the GLA adjustment or the reconciled Opinion of Market value if you decide they have some kind of value, but can’t put an exact dollar figure on it.
I have a statement in my report that discusses ‘Non-adjusted Qualitative factors’ and why they are not adjusted.