# Adjustment Values, Frequency & Dollar Amount

### Dave Towne

Certified Residential RE Appraiser at Towne Appraisals
AGA, MNAA, Accredited Green Appraiser - Licensed in WA State since 2003.
Dave Towne on e-AppraisersDirectory.com

### Ever wondered what other appraisers are doing with adjustment values?

Appraisers,

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.

Dave Towne

AGA, MNAA, Accredited Green Appraiser - Licensed in WA State since 2003. Dave Towne on e-AppraisersDirectory.com

### 17 Responses

1. Nice. I used to be a review appraiser for (GASP) an AMC and some of the adjustments I have seen are not based on a paired sales analysis at all. You would ask the appraiser and they would say, “that’s what I typically adjust for hardwood floors…” I never learned so much from reviewing other appraisers work. Now I only make adjustments for major components of value. And I rarely make line item adjustments above 10%. If I have to, it’s not really a comparable sale in my opinion. Great article. Thanks.

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• Mike Ford CA AG: SCREA, AGA, GAA, RAA says:

Josh, you had my empathy until I saw the comment about 10% adjustments. Even FNMA has recognized over the years that arbitrary of artificial percentile  “guidelines” are as erroneous as any other unsupported ‘guideline’ or rote adjustment. MAYBE in your market, comps are so close and similar that your ‘assumption’ of non comparability works at 10%. Most markets I’ve seen in developed urban and large metropolitan suburban areas are not that cookie cutter. I think your main point about being sure to support our adjustments is a better focus. Just an opinion though.

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• I.have to be honest I have and make adjustments over 10% if warranted by the market but I’m in Austin and have an abundance of comparable sales to choose from. At least for the last 5 years.

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• Mike Ford says:

Josh, that makes a lot more sense. Bottom line is that any given adjustment is required to be market driven. Whether 5% or even 50% (ok, THAT is a bit extreme but not unheard of).

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2. bill johnson says:

The difficulty I have in these national average polls is that if you work in a high dollar area (my average market value is near \$850,000), than every adjustment seems way low or way high. In an easy PUD neighborhood model match to model match comparison, a \$25,000 location adjustment is nothing, but yet the article indicates a \$10,000 adjustment is high. Condition adjustments in my area will often pencil out to be near 5% (\$40,000 to \$50,000) but yet the average nationally is only \$12,000. Has CoreLogic ever tried to figure out why the consumer will pay 10 to 20% (\$75,000 to \$200,000 +) more for that panoramic ocean view on the even side of the street but the odd side warrants a neutral rating. Appraising is very state, city, neighborhood, PUD, street specific, etc., so the idea that an AMC reviewer (completed a single USPAP course) from 10 states away can with any knowledge do a review, is a JOKE.

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• I agree that you really can’t understand a market from 10 states away, but some of the reports I reviewed were just crazy. And I admit a very small % of the reports were unsupported adjustments. I was actually their Chief review appraiser and a Certified Appraiser- so more than just a few USPAP courses under my belt. Most AMC’s employ actual appraiser’s but not all reviewers are appraisers. They are not reviewing for support though, most non-licensed reviewers only check for non-value related errors.

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3. I am in the same boat as Bill Johnson.  I live in the San Francisco Bay Area, and the national average adjustments are just not reflective at all with my market.  It would have been nice if Corelogic fleshed this out a bit more and broke the adjustments up based average sales price or region etc. It is still cool to take a look at what the majority of appraisers around the country are adjusting for.  I also agree with Josh Johnson in that for small ticket items I am not adjusting for them unless its warranted. A \$5,000 adjustment for a \$2 million dollar home in Palo Alto just doesn’t mean very much in the grand scheme of things.

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4. Mike Ford CA AG: SCREA, AGA, GAA, RAA says:

I guess my biggest issue is just what the hell CoreLogic is doing having 1.3 million appraisal copies to mine for data in the first place. Are they telling us that each and everyone of these appraisals had all personal identifying information redacted before being reviewed or ‘analyzed’ by their staff?

Who SPECIFICALLY authorized and then conducted this mass violation of confidentiality?

Did CoreLogic pay for each of those appraisals? Was data compilation a stated intended use in any of them? When these appraisals were ordered, was intended disclosure to parties not involved in the specific transaction given to all other involved parties, including the appraisers?  Anyone that uses CoreLogic services has to pay them for that use. What would give THEM the right to use anyone else’s non public information or professional work product?

Without context, the “study” is 100% meaningless AND valueless. Were these GSE appraisals? Were they all for market value? Worse, it is potentially misleading.

So we now have a “national study” that at least infers  specific adjustments may be the norm. One that other unintended users such as reviewers or possibly even appraisers may point to as being a ‘valid market analysis’ with respect to specific adjustments when it is in fact MEANINGLESS!

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• Baggins says:

Open up a can of worms lately?  Ha!  Boa Sells Landsafe Appraisal Svs To Corelogic

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• Mike Ford says:

Hi Baggins – I knew about that. But even so, the LandSafe appraisals would have had a specific client. Even if that client was BofA; IF they allowed data mining then THAT would have been an unauthorized use at a minimum, and in worst case scenario could have opened them up to HUGE lawsuits by property owners; borrowers and even appraisers for misuse and perhaps outright theft of services. Claiming appraisals were being performed for one specific purpose and all along may have been intended to be used for data mining by someone other than FNMA (which is ALSO an unauthorized use).

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5. Danny says:

Mike,

I’m with you. My first thought was….where or how did corelogic get this information? They claim in their article that they “used a national sample of approximately 1.3 million appraisal reports between 2012 and 2015”. Again, how did they acquire that data? I must be missing the boat. I have been an appraiser for 17 years and corelogic has never been a client or indentifed as an intended user in any single report that I have completed. While the adjustment information is somewhat interesting, I just cannot get past my initial question / thought.

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• Mike Ford says:

I think its worth asking CFPB to investigate how this came to be. Were the consumers aware that reports THEY paid for were being used for other undisclosed purposes? Were the appraisers? My understanding of confidentiality is that ALL non public information (including appraiser condition ratings and numeric dollar value comparisons) . Sure, anyone could drive by and determine their own opinion of condition or quality, but these were professional opinions applied to specific properties. Upgrades? That would not be anyone’s business except an owners or borrowers; or lender.

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6. jw says:

My original post referenced an af link, which notated the dozens of corelogic acquisitions in real estate, in recent periods.  Can anyone say;  Monopoly?  Checks to power are eroding at a record pace, and most mobilizations of the justice system are put forth to support the position of power, not to seek honest truth and justice.  Don’t expect answers to these ethical questions about data acquisition, from the new monopoly controller of this industry.  But how can a company successfully police itself and the majority of the industry, if they’re involved in both originations, data management, fraud detection, data aggregation, MLS data, defaulted holdings, and so on, and so forth.  The list of diverse integrations with this one singular company and it’s direct subsidiaries is now too long to list.  Betcha a hamburger that corelogic will or has already attempted to buy this website as well.

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• JW-You ask a legitimate question. I think the truest answer is that “They cannot.” What concerns me is that we keep hearing about how wonderful the “age of megadata” is and how traditional appraisals may soon become a thing of the past based on new technology and more efficient (read cheaper alternative, non USPAP compliant short cuts) analysis of this “megadata”.

Seems to me I read this story almost 55 year s ago. The Emperor’s New Clothes.

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7. Tom D says:

hey!!! CoreCrap has the best risk factor analysis in california telling lenders how bad your value is in inner city ghettotopia on the other coast.  shows you how frauds can make more money, taken from you of course.  i like this article a lot, too much expertise is being demanded from an opinion.  brother Mike, i am very close to joining with you.  Individually, we are a beaten you pick the cotton profession. I’m just not sure that the end hasn’t already occurred, and we are just some minor survivors.  and i know what you’re going to say.  and i am an optimist.

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8. Tom D. Without putting my neck on the line for out and out libel until I KNOW how or where they acquired their 1.3 million appraisal “samples”, I won’t say bad things about them. I have used the old DQNews market articles for years where I felt they were more accurate and or informative than highly suspect, potentially misleading 1004MC statistics. I think the shear volume tended to minimize the impact of outliers and just plain faulty recorded sales data. But it had to be relied on with care. Note I say tended to mitigate rather than “eliminated”, because the bottom line is that with huge databases, comes proportionately higher volume of errors.

I worked inside a title company (back in 1991+-) and I find it interesting that NOT ONE of the nationally known TC’s know any more today about what is a valid comparable and what is not, than they did 24 years ago! How could software hucksters that rely on their data be any better?

Tom, one of the MAIN things we have to fight today are the back room regulatory and legislative deals!  People that are powerful within our own profession have been more than willing to sell the majority of us out right along with some of their own members, for the benefit of a comparative few. In fact this type of thing taking place is what makes it critically important for the AGA; State Coalitions, AND appraisers Peer Groups and Professional Associations to work together as much as we can.

We are up against powerful interests at every turn (ABA, MBA, and Coalitions of AMCs and some of their shyster attorneys). That is why I continue to reach out to ALL, even some I have disagreed with on individual issues. It’s why I am trying to build a bridge with NAR and others.

Can we beat the professional lobbyists? Short answer – yes. Their very greed tends to make them one issue horses without a lot of flexibility when properly responded to, or headed off BEFORE they do their damage.

We need to accept two facts of life to do this: (1) We need ‘someone’ with national clout. LOTS of national clout in order to affect change (AGA comes to mind). State coalitions can only handle THEIR state’s issues, and THAT is  exactly what the big boy offenders count on. Fighting us on 50 individual state battlegrounds rather than one-stretched out over decades if they can!. Why do you think they left enforcement of Dodd-Frank to the individual states, and worded so ambiguously? (2) We also have to focus our issues in terms of consumer and voter interests or benefits. Those interests may be so broad as avoiding another taxpayer funded bailout, to a matter of individual consumers being deprived of competitive choices. Legislators have to have an excuse handed to them in order to “do the right thing.” Particularly when they are being lobbied heavily to do the self serving thing for the ABA or MBA.

To fix all of these things, we need YOU to personally become involved. You, Tom D. can make a difference! All YOU have to do *g* is call Jan Bellas at (301) 220-4100 or email her at janbellas@appraisersguild.org to get started. Tom, I don’t want to burden you with undue pressure, but the entire future of our profession is in YOUR hands. I truly hope you won’t let us down. My nine year old daughter hopes you won’t let us down. Heck, even my damn cats hope you won’t let us down. They’ve given up chasing birds in favor of store bought treats.

For the sake of all our avian friends, YOU need to join AGA now!

…but no pressure Tom.

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