Bugged About Adjustments

Dave Towne

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
Dave Towne

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Line Item Adjustments for Every Little Difference?

Illogical line item adjustments…

Appraisers,

I’ve recently ‘come in contact with’, in a semi-official capacity, a recently completed appraisal report.

In looking at the adjustment grid pages for 5 comps, items jumped out at me. These do not appear logical.

All comps, except one, have sale or list prices at even thousand dollar figures = $XXX,000. The one is $XXX,950. These are pretty typical in our market. Very seldom do we see these in odd numbers, unless the listing agent is trying to be cute, and buyers accept the oddity.

For line item adjustments in the report, the appraiser has made THOUSAND DOLLAR adjustments, rounding to a nearest $1000 amount, except the GLA.

The GLA line has adjustments of -$760, -$100 and +$6,120 for three of the 5 comps.

Can you explain why the GLA adjustment should be shown more precisely than adjustments for Location, Site Size, Age, Bed/Bath and parking spaces?

Can you explain why a $100 adjustment would be made when the sale price is $230,000. That amounts to an adjustment of 0.043%. Are we really that good?

Personally, I don’t make any adjustment for less than $500. When less, we aren’t that good. And it makes ‘us’ look foolish, especially when the adjustment amount is a tiny percentage of the sale price.

And I round all adjustments to the nearest $100, because it makes the report much easier to read. More precise than that…we aren’t that good.

Another item I noticed in the report is an added adjustable line item for ‘Fireplace’ included on the grid, with the subject and each comp having a fireplace and no adjustment made. Why would an appraiser include this extra item to clutter up the grid and not make an adjustment?

I know the answers to my questions, so you don’t really need to respond.

I’m merely tossing these out to the masses in the hopes that appraisers will actually think about the line item adjustments they make, and why they are making certain adjustments – especially those that don’t have a significant bearing on the opinion of value.

Remember, you DO NOT HAVE TO MAKE AN ADJUSTMENT just because a line on the form exists. You can move the opinion of value up or down (Reconcile) within the Comparables Adjusted Sale Price Range to compensate for line item adjustments not made.

Dave Towne

Dave Towne

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

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8 Responses

  1. A small adjustment doesn’t make the appraisal less credible. I have gotten it from both sides by reviewers, why isn’t there an adjustment, why are you making a small adjustment why not make it 0. On the UAD form you have to put something in the adjustment line if there is any difference at all. So why not just make the adjustment. It makes it easier to see that there are differences in houses. Then again would a typical buyer pay less for a house if it is 15 sq ft less in GLA, probably not.

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    • Mike Ford, AGA, SCREA, GAA, RAA, Realtor(r) Mike Ford, AGA, SCREA, GAA, RAA, Realtor(r) says:

      Ross your question is a good one. “Why not make the adjustment?” The answer is surprisingly simple. We do not make $21.00; or (even) $100 adjustments because (or IF) the local market doesn’t make them.

      Our adjustments are not made ‘based on our experience and professional opinions’. They are made based on our supported and credible perception of the local markets reaction in terms of dollars (or marketing time converted to dollars) for a specific feature or characteristic.

      Further, those who have taken recognized courses on the topic know that adjustments should be rounded to market significant numbers. IF your market rounds to $100, fine….but in most areas adjustments under $1,000 are not able to be documented (supported) as being “market adjustments”. In some price or value ranges adjustments of less than $5,000 or even $25,000 may not be appropriate. As Dave said in his article “We just are not that good…” (to be able to identify 1/2% of SP adjustments).

      When I see adjustments of $15,935 for anything my first thought (admittedly a knee jerk reaction) is “amateur”; or alternately formulaic (automated or by rote) without human oversight and correction.

      Im grateful you asked the ‘why not’ question. No negative criticism of you is intended. Many appraisers have learned this way.

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  2. Jeff says:

    If you really want to be good at what you do don’t think every report is suppose to look the same or that sales are suppose to be in whole numbers. The square footage adjustment is automated and that is why it is there at all even if a minuscule adjustment

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  3. Baggins Baggins says:

    Logic has left the building. Robot minds review these reports now.

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  4. koma says:

    Ah Dave, That would be a 0.00043% adjustment not to be picky. What about my areas where houses sell in the city for $10-20,000 upto $7-800,000. So that $100 adjustment on a $10,000 house is not warranted? I do agree with you on not being that good. I see appraisers give an opinion of value of just say $239,990 and I’m like man I wish I was that good (NOT). Myself it would be $240,000.

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  5. Ron Maloney says:

    Very good article Dave.

    I completely agree with your rationale.

    As well as the credible input from Mike Ford.

    I’ve been teaching this as well, for along time.

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Bugged About Adjustments

by Dave Towne time to read: 2 min
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