The threshold doesn’t mean knock off first 50 to 100sf. It means that 50 to 100sf is residual and near impossible for anyone to determine. What if you have a home that is a little larger and also has copper toped bay windows. Did you adjust for quality where the the others did not have this amenity. If so you double dipped because they more than likely made the 50-100sf difference that you adjusted out. Then you adjusted them out again for being a quality/design feature.

“Using a threshold figure makes it difficult if not impossible to use the appraisal software built-in adjustment calculator – if your software has that feature – because it is based on exact difference in GLA.”

That’s just completely wrong. You can do this in the software by several means.

“Using a threshold figure means you have to provide a cogent explanation why you didn’t adjust for the actual difference.”

The entire report is supposed to be a cogent explanation.

“Using a threshold figure makes it difficult for report users, readers and reviewers to understand your adjustment process; if they can’t understand it without diving into your explanatory addendum, they will question the validity of the entire report.”

No they will not. Never in 40 years have I had that happen nor heard of it happening. The reader will look across the grid and see GLA figures.. 1000 — 1200 — 980 — 1060 with adjustments Subj — -10K — 0 — -3K They can clearly see you used a threshold and can tell it’s over 20sf and under 60sf. They will realize the reasonableness of this. If they don’t see this they probably should not be trying to understand the report.

“But, before you send such, consult an appraisal textbook to see if making GLA adjustments between the subject and comps using the threshold process is recommended.”

How about you go read a couple textbooks on music theory. Then go write a hit song.

Hell I just sent a report in yesterday. Investor bought it, renovated it, converted a porch to GLA that added 200sf on an 1140sf original home. They put it in MLS as 1140sf instead of 1340. Did the investor get paid for all his GLA? Of course. Had I used a comp that was 1370sf would I adjust it? No.

If it works for you, great but it seems you are suggesting others try a method that you feel is a solution to a problem that 77% of appraisers feel doesn’t exist. I don’t think anyone involved in the real estate process needs a textbook to understand this simple concept.

Order of operations is sometimes applicable, not always. Each component of the home, an individual part of the equation. That is now an adjusted part. A factor. However, we would not allow the individual factors to then alter other individual adjustments downstream, or upstream. Appraisal is in the end, a rather simplistic math problem. Which is why when appraisers use advanced mathematical programs to extract ‘market data’ for what constitutes a fair median or average adjustment for beds, baths, agla sq ft, or even land sq ft, they have then created an order of operation which necessarily does effect other individual line item adjustments or quality adjustments downstream. The whole enchilada of possible adjustable amount, applied in extracted adjustments. This leaves no additional room for validation of quality of materials adjustments, and the real world cost differences for materials and deck size, presence of feature or not, depreciation of materials on an individual basis, etc.

Those generic appraisals are easy reads, they just ignore all those real world differences and fall back on extracted data to apply adjustments. Where as the alternative distributed allotment of recognized valuation differences, leaves one with a nice clean and transparent amount which is to be adjusted, for individual items of the home. All else being equal, we don’t need massive market data sets and regression tech to point out simple price and value differences which are obviously attributable to the feature differences.

Using regression is like appraising in the abstract, and distributed allotment would be more like what’s right in front of us in the real world. That’s how I approach it anyways. All we need for valid market reaction adjustment identification can be extracted from a final set of six comparables, selected after all the other standard chores involving competent market research and selecting reasonable comparables, etc. One can’t just use that method selecting random comps, but if you’ve done the research and have your finger on the pulse of the market, those limited comps selections tell an appraiser all they need to know about what is reasonably accurate adjustment, and what is not.

Because we can read the net/gross adjustment differences right down the lines as all applied adjustments are located in one comprehensive section of the 1004 form. The 1004 form is a math equation, on one single page. (which is what makes the new forms such a disaster, no net/gross indicator, and spread out over many pages.) It is also essential to understand the concept of diminished value due to effective age differences with this method, how to competently estimate, and to know real world cost of material and labor factors.

‘The point is to be able to recognize legitimate exceptions vs default / rote assumptions that order is not required because we are using lump sum rather than percentile adjustments. It can go downhill from there.’ Yes. When you’re into high end a-typical, different more dynamic approaches are necessary. There are too many components, too many functional differences, it may become important to move to a percentage and overall approach, not dive into too many individual details. But for an average suburbia home, appraisal is not as complicated as people think. I like to say, if you can’t do it with a pen and a piece of paper, you’re missing the point. Complex charts graphs and market presentations are simply not necessary for credibility in comparing well matched individual sale examples. I always try to present data in simplistic ways anyone can recreate and anyone can understand, no fancy subscriptions or math degrees required.

Just today I ran across a builder sales record, that when verified via county, was +81k higher on MLS compared to lower county figure. That is agents gaming the avm systems to bring aggregate numbers upward, creating illusionary anticipation. Big data is too easy to manipulate.

A number of years ago a friend, was driving on a Saturday viewing some comps for an avigation easement and expansion of LAX, He noted new owner, recent buyer mowing his lawn, and also noted that this buyer paid a seemingly high price. My collegiate approached the new owner asking about the price paid!
He said “HUH”

As with anything involving the valuation of real estate, its not a simple answer. Those bits of information that are gathered over time from the sources help to test analytical data programs that I use in addition to basic excel spreadsheets, plot graphs, etc. I use many tools and sources which is one of the reasons I try to keep up with what my peers are using. I am the last one to think or say that I am all that smart so I try to keep informed about what all the smart kids are doing 😉

There is no right tool or answer because they all have to be weighed in relation to the subject property itself, the “tool” input/output, the drivers in the particular market and market segment I am analyzing, and overall common sense.

There is a big difference between criminal and civil trials. One is used to protect the public from Charlatan’s the other to sell a concept. One will expose the testimony to provable positions, the other carries little liability. Acquiring a site for emanate domain taking may not involve any criminal intent.

In the early 1960’s I attended a class given by a U.W. professor, Dr. (?? can’t remember). He was attended on the stage as his mother had taken strange drug’s.
That was only distracting for moments as he got into his client’s Fast foods and Commercial locations. He introduced us to
multiple algorithms. He said that r squared would check for accuracy, and that a Shell station with a 300′ sign on the freeway would do more gross sales than one without. His clients included a Queen and several generals.
Evan today the queen and the generals are still very believable, because of their algorithms I believe that the speaker is long dead.

Add market variance… Just because its the same house, one may sell for more. Then do that math LOL

Baggs, Almost the entirety of my thinking these days is colored by the many appraisal complaints I read from states all over America.

While I think of FNMA as an actual criminal organization that simply hasn’t been caught yet (or should I say recently, again?) they do influence a lot of lenders and appraisers. Often incorrectly.

Anything I post or suggest is usually to suggest a method to reduce the frequency of phony FNMA complaints.

Understand that they do not in my reasonably well-informed opinion promote the best or accepted sound appraisal practices. They promote many ideas and concepts that will enable them to keep misleading their investors.

Going back to basics is an excellent idea for many of us today. Dumping FNMA completely is a better idea, but not all appraisers are in a position to do so…yet.

FNMA is all about plausible deniability today. Even as they continue to undermine the public trust; and their own credibility. Eventually, even the FHFA will be forced to wise up to their collateral fraudulator’s egregious and fatal flaws.

IF a ‘threshold’ becomes significant then I can see it. (99/SF not adjusted out of habit, etc). Compared with a comparable that is 99 SF smaller, AND we under-measure the subject by 80 SF as a result of rounding off, the actual difference now becomes 179 sf. Where 99 sf may or may not have been ‘significant’ by our consistent practice, 179 sf most likely is.

Baggs, I don’t think David is saying what you are understanding. Maybe Im was mistaken.

Order of adjustments is something that is taught in basic classes on appraisal (at least AI does). Im not convinced how critical they are in relatively lower value ranges that most SFRs fall into, but they can be. I DO strongly agree on market conditions adjustments, and cash equivalence (to the extent we ever know in SFR / FNMA appraisals).

Im just not seeing the double dipping you alluded to.

FNMA’s recent percentile of site adjustments article touting the infallibility of FNMA CU (or as I prefer to call it, [FNMA FU 2.0]) does suggest that site adjustments MAY be taking place as an afterthought. Maintaining the textbook-recommended order of adjustments could be a good way of forcing ourselves to address this inconvenient characteristic with something other than ‘nominal or token’ $1.00 or $2.00/sf adjustments that have zero credibility.

Im usually in built-out suburban or urban areas. Vacant land or lot/site sales are not common. Or where they are common (Hollywood Hills for example), they are all over the board. Actual extraction properly performed is still a valid method. Regardless, of whether we have vacant land sales/ lots or sites, or extract site values, we do have to consider the value influences of the site before we can hope to get the condition and GLA right.

Virtually ALL of our techniques or the tools in the toolbox can be (and have been) abused.

I think David gave us all an excellent and probably much-needed reminder. We can all find excuses or exceptions. The point is to be able to recognize legitimate exceptions vs default / rote assumptions that order is not required because we are using lump sum rather than percentile adjustments. It can go downhill from there.

He’s a LOT more polite than I have been known to be on occasion. Another good reminder.

Agree. Actually, my response was ‘wow’.

I’ve seen a lot of thresholds in my past working years. Most thresholds call for a new start in a different direction.

Think of the new buyer having lost the last three offers. Or think of the experienced investor, finally being able to afford the market.

Two different markets each involving big emotions. These emotions come from both parties The seller and the buyer, and an agent waiting a commission.

Whoda think that a piddly percentage would make a THRESHOLD, or close a sale.

The appraiser doesn’t make market, the appraiser reports it.

David- This is not meant to puff out my chest but to respond to an assumed accusation. Just because most appraisers don’t do their full due diligence does not mean that we are all guilty.

As a Realtor Appraiser and Realtor Salesperson, I speak with buyers, sellers and agents all the time. My main administrative assistant is also an agent and we have plenty of discussions. I show up at Realtor meetings and social events for the very reason of keeping a good relationship with those that can provide me the information I need to know.

As far as keeping up with my peers, I attend at least one (sometimes 2) annual appraisal conferences every year and I have belonged to a nationwide mastermind group for over 10 years.

As general practice, I speak at agent sales meetings a few times a year where I have discussions with agents regarding real life scenarios as to what they know and what they experience. Additionally, I send out email confirmations for each sale I use in a report asking the agent to provide feedback and keep them filed away on my hard drive… so yes, I talk to, get information from and find out what is motivating buyers to make the decisions they are making as part of my every day life.

Interesting Don. Pools are an animal to themselves, often difficult to explain to people on account of their personal fears or personal attachments to the pool. Their costs may not have alignment with market value. In Colorado pools used to be much more popular, lately I rarely see them, most were over time dismantled and removed. All it takes is one season of poor attention, one extreme temp swing, costs nearly as much as installing a new one, just to fix them.

Given our simple advancements in low cost mechanical and safety items, there should be zoning coding rules for every outdoor pool in a residential setting to have a big deal durable closing cover, complete with emergency recall on the underside and top side. Complete with in ground pole mounts where temporary railings can be installed around them. Creeps me out, just the body of water in the middle of a residential environment, yet the pool is more of an industrial item, unlike any other real property component. Too high of a risk factor. Pools are luxury items which fit in better in ultra lux very high end neighborhoods, as the costs to maintain them over time clearly exceed their install costs. Lately the market has shifted to above ground pool structures for cost maintenance concerns, but those still do not go far enough to mitigate the every day usage risks.

The opposite position there, is where does an appraiser get a crystal ball from to know with certainty what exactly is included in a buyers decision making process and what is not. Just do the math and adjust everything. Simple. Imagine actually performing detailed buyer motivation research for every single comp selected. Then you discover this buyer thought the little size difference matters, but the next buyer thought that did not. So you follow this silly theory about buyer behavior and adjust down to the individual sq ft for one comp, but then round out your adjustments for the next comp. As I mentioned below, don’t get too caught up in theory.

I look at 5 properties on a Monday and write them on a Tuesday. Same style and still make long the same base fees I was during the pandemic. Around here that has been very hard to do. Don’t assume everyone is earning less than you because they put more work in the reports

I studied pools, and owned one years ago, wouldn’t again. Did you know that the average age of a pool is 8 years or so. The cost of the chemicals are frequently treated beyond the sales price. Many buyers are open to buying a house with or a house without.

Some of the most tragic things happen among pool owners, some of the pool owners are the happiest. Talk about it in your community and find out some of the bad stuff. One our streets had had 3 kids drown, one house three times, or was one of those when a pipe broke and the pool floated out of the ground.

My family invited the football team over for spaghetti just before a big game, and my job was to separate the kitchen ware from the paper ware. What a wonderful memory, but it included getting soaked.