Adjustment Question
Rounding of adjustments is perfectly acceptable.
Would someone kindly, and logically, explain to me why the ‘Site’ is adjusted precisely at $0.20 per square foot, down to the nearest dollar, but all other adjustments are rounded to $50?
Are ‘we’ appraisers really that good, where we can divine buyer motivations or values (i.e., adjustments) as accurately as that? In other words:
“Well, I believe it’s worth exactly that much.”
Usually I see this kind of adjustment practice to the nearest dollar when applied to the Gross Living Area and below grade areas, which is also screwy (IMHO). This is the first time I’ve seen it done to the Site.
Could it be that this kind of nonsense preciseness is why some reviewers and underwriters have so little faith in appraisers, and why many steps are being taken to push ‘us’ to the side?
Rounding of adjustments is perfectly acceptable.
So is NOT MAKING an adjustment when the adjustment amount is lower than a threshold number that makes more sense than an actual precise dollar. Your report software probably has ’rounding’ and ‘threshold’ settings you can choose.
For example, in my reports, no adjustments are made for less than $500, and larger adjustments are rounded to $100, because we are ‘just not that good.’ Yes, that’s my opinion and yours may vary.
Oh by the way, the OMV in this report is ROUNDED to $XX5,000.
Dave Towne on e-AppraisersDirectory.com
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For almost 30 years, I rounded site, GLA, and other adjustments to the nearest $100. About 5 years ago some “entity” must have put a bee in a bunch of underwriters drawers as I was constantly receiving questions as to why I used a differed $ per square foot to adjust for GLA. I was using the SAME $/sf but it was rounding to the nearest $100. I could not for the life of me convince multiple underwriters that rounding to the nearest $100 in the GLA adjustment made absolutely NO difference in the value conclusion. So, I now round to the nearest $ and get few if any complaints, except from other appraisers who want to know how I can be so “precise”. Well, “I fought the Law and the Law won”. Sometimes you have to pick your battles.
In my market I round to nearest $1000. Rarely is even $500 a realistic market perception. Anyone that questions this is clearly inexperienced and probably not qualified to understand the answer even if its explained to them.
I’ve said things like “Requesting party to identify self by name, company and position within the company so I have a record for my file.”
I have never received a complaint on this and I still round to the nearest 100
Definitely nutty UW’s. All adjustments are generally rounded. Except gla, which have adjustments like -6824 because of so called “consistency”. But then they accept the notion of no gla adjustment for say less than 100 sq ft difference.
I round all of my adjustments to the nearest $100 and have never received a complaint. It simply makes sense to anyone who is familiar with significant figures.
HA! But you forget who we are dealing with most of the time……
Seriously – If Dave rounds everything and arrives upon an opinion of $230,000, while Dan arrives upon an opinion of $230,100, what does it matter? Unless we are talking across the board. Then we have that little thing called evidence. If your data shows adjustments are applicable at $62 per square foot, then you had better use $62 and not $100. To round that to the nearest $100 would potentially lead to results that you cannot justify with your evidence. For a comparable that is 300 square feet different than the subject, that would be an $11,400 swing in adjustment that can’t be justified. Just my two cents.
What??? I think that you might not understand what he is saying. He is not rounding the $62 but is rounding the result of the $62/sf adjustment of the differences in GLA or $62/sf x 211 sf = $13,082 or $13,100.
Dan, unless of course your “evidence” is a CoreLogic based regression program…or some other equally unreliable system that only looks at 70% of the value related characteristics of a property, and allocates the remaining 30% among those 70% factors.
Do you NOT use sensitivity analysis after you THINK you have identified the adjustment factor? By being so finite on the indication derived from ‘evidence’ I assume you are talking about ONLY statistical evidence, right? Contrary to current trends being promoted by the Big Data ‘set’, there are many other forms of perfectly acceptable market ‘evidence’.
Failing to round to market signficant numbers is a sign of rank amateurs.
Please remember that the vast majority of ‘administrative reviews’ are performed by people whom are not appraisers, nor versed in appraisal valuation theory. Mercury does not have a rule check for exact adjusts to scale for land, but it does have that for agla. One presumes the competitors may have that though, it’s a point easy to measure w/ automated tools. I don’t think you’re on to anything here Dave, nothing wrong with entering across the board exact then rounding the final reconciliation.
Its not the cost of the improvement, its the value the improvement adds
I see no issue with across the board adjustments being exact with evidence to support the average, weighted average, or predominant market derived contributory value based on the unit of comparison. I agree that if OMV is developed in this manner then rounding should be completed at the end. I definitely agree that minimum thresholds should be used. When reviewing reports it is frustrating seeing $300 adjustments on reports with a final OMV around $300,000.
Well when I try to ‘add the value’ to my house. I end up paying retail market rates almost every single time. Theory is a nice idea. In the real world you pay dollar for dollar and unless you’re on a far side of the spectrum one way or another, your gains are tempered by the real world cost. An informed buyer who’s been there and done that won’t pay a seller a fortune for installed materials they could otherwise manage themselves with simple labor processes. Only when a home is really trashed or really dated, very simple, not keeping up with market standards, only then does it begin to make sense to buyers to pony up the cost + investment. It’s a hassle to do that yourself, having contractors all day for weeks is no joke and not cool if you are living there. But for just a hardwood spread, just a deck, etc, real world costs are the most applicable consideration. In my humble out in the field and not stuck to the desk opinion of course.
Its not the cost of the improvement, its the value the improvement adds
I review full time after 27 years of appraising. please remember that the market approach is based on market and not precision formula with generic non rounded numbers, it makes report silly.
Absolutely agree. If sale prices are ALL (or nearly all) showing numbers like $500,000; $490,000 or $495,000, and $489,000 then the market signficant number is $1,000 and quite often $5k or even $10k
Telling someone the adjustment for site is $11,393.99 is misleading…and amateurish.
Makes me wonder who did the appraisal. Appraiser signing it or the software programmer for the vendor selling the autoadjust software used in the report writing stage.