AUTHOR: Steven R. Smith, MSREA, MAI, SRA, Smith Realty Advisors, Redlands, CA, Real Estate Appraisals, Consulting, Expert Testimony, Forensic Reviews, Fraud Research and Analysis, Litigation Support. All opinions expressed in this post are the author's and may not reflect those of the Appraisal Scoop blog.
How were you taught to prove your market data adjustments? Or were you taught to do that at all?
I was not. I was given a list of adjustments to use, and instructed to use them in every area, quality and price range. From day one, I argued that this was WRONG, WRONG, WRONG. The first day I proved that their Time Adjustment was wrong. My boss made it clear that I was not management material. 52 Weeks later I quit.
It is sad to think one had to quit a bank job to be able to do appraisals correctly. I was not learning anything there. In five more years I would have known what I knew after one. I knew nothing. Actually, I had to get into trouble before it became an imperative for me to do things right.
Talk about not being able to find a Mentor. Don't even bother, just take advanced course work, not CE seminars. There are lots of good advanced courses for the residential appraiser, through the AI, NAIFA and others. My learning was to eventually come from course work.
The truth is that no line item adjustment is the same in all areas, all price ranges or qualities. Anyone who is making the same adjustments for the same line item all the time in all areas, is simply doing it wrong.
My recommendation is to not use a template or stored phrases (F-2 keys), but to think your way through the report, about what is the truth about your market, and the various boxes you are asked to fill in. Think of writing a sentence or paragraph about each box that provides the support and analysis for it.
I found help in the SREA course 102 where we dealt with proving adjustments. There are many good courses one can take today, not CE seminars, but courses, and learn how do support adjustments.
A Pool in a home 30 miles north of Anchorage might be worth ZERO, and in Palm Springs, it might bring 15% or more to the overall property value.
Appraisers who provide support and analysis for their Adjustments, will distinguish themselves from the vocational and be looked at as more of a professional. People talk about us behind our backs at levels we are not even aware of. Since they are going to talk, give them something good to talk about.
A new-hire in our office must prove at least three adjustments on every house assignment, no matter the fee.
I like them to prove Time, Lot Size and Improvement SF Adjustments. And, to verify the terms or concessions, which vary on each comparable.
Here is a thought, what IF Values declined 9% in six months, but are declining now at 2% per month and we use a 1-month old sale, how much should it be adjusted? What about a 2-month old sale? What about a 6-month old sale?
Or, how much is a pool/spa package that cost $40,000, worth in Northern Michigan, and in Palm Springs. Or, how much is it worth in a $1,000,000 neighborhood verses a $300,000 area?
I say adjustments for any particular line Item, are in fact a percentage, not a flat dollar amount. And, during a boom period, any amenity may add more value than during a bust. Conversely a negative factor such as a bad layout due to a funky add-on, or a property in poor condition, become real hammers on value during a Bust and shrink during a Boom.
So, the answer is that it depends on the type of market in terms of it being strong or weak, the location and the price range.
Yes, our job is hard if we try and do it right. Fees should be quadrupled to cover all we certify compliance with, at least in my mind they should.
AUTHOR: Steven R. Smith, MSREA, MAI, SRA, Smith Realty Advisors, Redlands, CA, Real Estate Appraisals, Consulting, Expert Testimony, Forensic Reviews, Fraud Research and Analysis, Litigation Support. All opinions expressed in this post are the author's and may not reflect those of the Appraisal Scoop blog.
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