FNMA realized appraisers were not making true market derived adjustments, but just appraising within those arbitrary guidelines in order to not have client revision requests, or add more commentary. Bottom line, it is very difficult to prove adjustments using 3 sales, which is why I feel that the industry will eventually adopt a value range reconciliation. Residential real estate is priced and sold more on emotion unlike commercial which is numbers driven. That’s why I love the 2-4 family world, much easier to prove your value when you have market rent!

And precisely why you want to explain these types of widening. They can happen. They don’t often happen, but when they do, we simply need to explain the heck out of it (my opinion at least).  Thanks for your interesting example. Think we have all had some doozies, but that one takes the cake over any of mine 🙂

Even after the obvious (but unstated) concern about making rote adjustments is eliminated; and we assume such adjustments as are made are all market derived and supported, we can still face the unreconciled (widened) value range.

In my area if I cannot readily determine and verify the cause of the disparity, its frequently better to simply find alternative comparable sales that are more similar.

Sometimes finding (and proving or credibly supporting) the specific percentage or dollar values for adjustments is simply not possible and qualitative rather than quantitative analysis is the only viable solution for some items.

Here is a specific example: Property appraised about 25 to 30+- years ago by myself under mentoring of SRPA for $1,150,000 and a second (MAI) appraisal of $1,180,000 [many unidentified owners ago so no confidentiality issues remain]. IF you google it use satellite to street maps view and pan to the right. Its the water tower house NOT the ‘normal’ one that pops up under the address search. Zoom in -big number “1” above entry.

1 Anderson Court, Sunset Beach, California.

270+- degree ocean and harbor view; 360 degree panoramic view. Five level (four story). About 1,500 sf (then); (2) built in G1s. Two bedrooms plus third guest room and wine cellar or exercise room on first level to either side of main entry and elevator. Spa deck elevated outside “2nd floor”. Exceptional and extensive special features list. Use: “SFR” but (then) zoned M1 and on a 30′ x 30′ site. Beach sand and access about 200 feet away. Boat marina & harbor to landward/inland side.

I defy anyone to accurately quantify AND definitively SUPPORT the contributory market value; OR perceived market value of any identified main feature by regression; pairing or GIM (It COULD be used for weddings back then). Area “agent opinions” did help both independent appraisers arrive at such similar results. Such informed opinions have fallen into disfavor these days.

In the end both appraisers independently conceded that there were many features that all common sense dictated had ‘value’ but for which no specific adjustments could be segregated.

Attempting to use surrounding area market adjustments for all significant (further) identifiable differences produced the kind of widened range Ms. Massey pointed out. IE: extensive marble; large gauge electric train racks built into walls that could carry items from kitchen two floors below up to bar / recreation area on top floor; computerized window shutters, fireplace, cylinder door to bath; steam bath, etc., retractable to near-ceiling (small) dance floor.

Sometimes we just have to be prepared to tell clients that (1) appraisers do not manufacture data; and (2) this is the closest anyone can come; AND that not all items warrant adjustment just because a ‘difference’ exists.

BTW – THIS is why we all appraise real estate and used to love it! Back when we recognized it was as much an art as a ‘science’. Thank you for sending me down memory lane Rachel.

Sort of, but they both carry important weight for consideration. The net and gross both can indicate base similarity and gained dissimilarity from quality inclusions. Two identical homes can have substantial adjustments, depending on what needs adjustment for. The net indicates relative balance, smaller the better. The gross indicates whole difference, larger means best matching comps were not as readily available. If comp #1 keeps both numbers below 10%, that’s an ideal scenario.

Great article. Many appraisers are focused on the technical application of forms filling, developed by non appraisers primarily. They miss the point that it’s o.k. to apply variable scale adjustments for excess sometimes. But try telling that to the robot minds and non appraisers whom review reports for ‘adjustment consistency’. So a good solution is to bounce excess or individual adjustments into line items and unique inclusions. Even then, I still take a generalized ‘nickle and dime’ approach. One of the challenges for appraising is to get your mind around how much price value influence material inclusions and features have. And we’re dealing with big money and large numbers, it can blow the mind. So; Simplify the equation with relative approaches. $2.5k porch, $5k sunroom, $7.5k garage addition. That’s nickle and diming the adjustments. Take 3 zero’s off, and take a relative generalized approach for more simple pieces of the pie make a whole, sort of simplified analysis.

Great article, thanks Rachel.