Appraisers' Free Forum

I was reviewing sample appraisals for approved appraiser list for my employer. I noticed that the dollar amount per square foot in the sales grid for GLA was not consistant. I called the appraiser as to ask why this was so. The response was that they could not prove 100 square feet and less from market data indicated a selling price difference. How the appraiser calculated the GLA adjustment is as follows:

Example-Subject 1500 GLA- Comp1 1600- GLA Comp 2 1700- GLA and Comp3 1800 GLA. Their reasoning is if they do not make an adjustment for the first 100 GLA difference (Comp 1 no adjustment) then they should only adjust the remaining comps (Comp 2 adjusted for only 100 instead of 200 and Comp 3 adjusted for 200 instead of 300) for only the amount of GLA over 100 in relationship to the subject.

What are your opinions of this methodology?

Hey Bill. Maybe I am wrong but here's my take for what it's worth.

It is my opinion that their (your potential approved appraiser) "reason" does not flush with their "reasoning". In other words, they have no idea. Someone told them that it's typical to not make an adjustment on 100 sq. ft. or less. Then they screwed up the following adjustments (for #2 & #3). Chalk it up to laziness and relying on the "list" of adjustments. Better yet, ask them to justify how they arrived at the living area adjustment. Tell them if 100 sq. ft. doesn't mean much to them, that they can add a laundry room addition onto one of my rentals. For free.

I would ask, if the appraiser has no support for the 100 SF difference adjustment then what is the justification for the comp 2 adjustment for 100 SF. Then I would ask, where the support is for any adjustment at all. In this market 100 SF is about equal to one small bedroom and there is lots of data to support # of bedroom adjustments as long as functional problems don't arise.

I checked no, but I'd give the guy a chance to explain the counter-intuitive method. I recall some instructor saying that adjusting less than 100 SF or $1,000.00 is not justified. I think the rationale had something to do with de-minimis differences, which makes some sense to me, but that would have to be in relation to the value of the subject and comps.

I voted maybe because there's not really enough info for me to make a decision - it could be justifiable or it could be someone who doesn't know what s/he is doing.


And I might just be getting too tired of the bullshitters in this business.

I would ding the hell out of the adjustment. It is OBVIOUSLY not a market driven adjustment but nothing more than a sophisticated effort at justifying a swag.

FWIW, the current method for adjusting sf as taught by the new NAIFA courses has you extracting the value of all non-house stuff. Remove the value of the land, the improvements, etc from the selling price. Divide that number by the number of feet for the house, and use THAT to develop an adjustment. They recommend doing a mean number based on the various prices psf developed that way and using the deviation from that mean to establish the comparables given the greatest and least weights. Of course the various improvements and land will be adjusted independently. Frankly, I think every GLA adjustment should reflect the value OF THAT COMPARABLE. You are supposed to show the comparables worth, at the value of the improvements, which, if a house sold (minus land and non-house improvements) for $50.00, then if that house were increased in size by 100 feet, then it would increase in value by $5,000, assuming that if people were willing to pay $50.00 a foot for the original house, they would be willing to pay the same for the extra 100'. Adjusting comp 2 or 3 that sold for $35 and $55 psf seems silly.....they should be adjusted $35 and $55 to reflect the market for those particular amenities in that condition.

If you establish the subject lot at $50,000, but comparable 1's lot is worth $35,000, then a +$15,000 adjustment is in order. If comparable 2's lot is worth $75,000, then a -$25,000 is in order.

In adjusting for half a bath or a full bath, take a look at M&S. If the house is "Average Quality" the cost "per fixture" is $1,110 and the cost "per rough in" is $450, then the cost for the half bath is two times that ($1,560 * 2 = $3,120). Lets assume they say the house has an effective age of 20 years. An average quality house has a typical building life of 55/60 years. this means 1/3 of the house is "used up" leaving 2/3 of the life intact. take that 2/3 against the cost of a half bath (two fixtures and rough in) then that half bath is worth about $2,080. This number SHOULD support the market response developed through paired sales. The rest of the non-house improvements can be handled the same way.

But no. the appraiser whose report you are reviewing doesn't have a clue.

Goodpasture wrote:FWIW, the current method for adjusting sf as taught by the new NAIFA courses has you extracting the value of all non-house stuff. Remove the value of the land, the improvements, etc from the selling price. Divide that number by the number of feet for the house, and use THAT to develop an adjustment. They recommend doing a mean number based on the various prices psf developed that way and using the deviation from that mean to establish the comparables given the greatest and least weights. Of course the various improvements and land will be adjusted independently. Frankly, I think every GLA adjustment should reflect the value OF THAT COMPARABLE. You are supposed to show the comparables worth, at the value of the improvements, which, if a house sold (minus land and non-house improvements) for $50.00, then if that house were increased in size by 100 feet, then it would increase in value by $5,000, assuming that if people were willing to pay $50.00 a foot for the original house, they would be willing to pay the same for the extra 100'. Adjusting comp 2 or 3 that sold for $35 and $55 psf seems silly.....they should be adjusted $35 and $55 to reflect the market for those particular amenities in that condition.

Sorry to hijack your thread Bill, but the underlying question, "what is the way" begs an answer. I that isn't sufficient blame the distraction on GP. The following has nothing to do with reducing GLA by 100 SF across the board for gawd's sake. GP reviewed one of my URARs and taught me the same thing he said above. I have two observations that really are systemic more than specific.

First, finding the market value of the different amenities is not a piece of cake and is most likely going to include some kind of guess work. Can we use the adjective "reasonable" since nailing them down market value with paired sales is almost impossible, even in the most crowded markets. Indeed, as GP points out, appraisers may even resort to the cost of construction to figure out what some amenity is worth. It seems to me that reviewers must necessarily apply the "reasonable" standard, which actually has experience or "common sense" as support.

Second is the time delay in doing as NAIFA suggests. There is no question that if you apply the GP method you can point with confidence to support for the GLA adjustments, but I think it is inordinately time consuming and not demanded, in this day of being ever cheaper and faster to survive financially in the SFR mortgage end of appraising. Finding and making different adjustments for each comp takes a lot of time.

I believe it is time the fraternities (including NAIFA) fully recognized the reality SFR mortgage appraisers are dealing with and interpret USPAP to include the impact of diminished fees on the SOW. Then for cheaper-faster versions of SFR mortgage appraising the appraiser would be held to modified version of the GP method. Adjust by the average $/SF across the board and be done with it.

If we really are here to guard the gates by making adjustments supported by unassailable evidence, then SFR mortgage appraisers need a subsidy, because last I heard the clients don't want to pay us to do that. Maybe NAIFA et al can send money and the tide will be stemmed. Nothing wrong with peddling the best, so long as you know the reality is that only a very small percentage of appraisal work available justifies it with a shower of $$.

In place of what GP does, I would advocate for a reasonable standard that allows for adjustments based on averages, experience and common sense. Dangerous territory, given the number of charlatans among us, but there isn't time or money to do what GP does. At least, I can't do it fast and I'd like not to be cheap.

I'm not an advocate for dumbing the profession down any more than it already is, but something has got to give and I would rather it not be the SFR mortgage appraisers who want to do a good job appraising.

So bang me back.

To bring it back, I don't think a 100 SF reduction in GLA across the board has support in the market either, or are buyers and sellers doing that?

Edd Gillespie wrote:...........I would advocate for a reasonable standard that allows for adjustments based on averages, experience and common sense.

I have seen WAY too many adjustments made where the SOLE support is "the appraisers experience" and the report is signed by a trainee.

100 SF in a 1,200 SF makes a hell of a difference. 100 SF in a 3,800 SF house on a full basement... not so much.

I am starting a new thread to discuss appraisal and review standards.

M L wrote:100 SF in a 1,200 SF makes a hell of a difference. 100 SF in a 3,800 SF house on a full basement... not so much.

Maybe not so much in terms of % of selling price, but for that 3,800 sf subject, using comparable houses at 4,100 sf and 3,600 sf, they will ALL be within a few dollars psf of each other. If that 100 sf is worth $100.00 psf, then that $10,000 is significant. Even on a $400,000 house. Granted, as a % of the value of the house it may not be all that significant a %, but as a dollar figure, show me anyone with any sense that will leave $10,000 on the table when they can choose otherwise.

A follow up question-please do not answer the poll in regards to this question, as this is not directed toward the poll.

If the only questionable issue in the submitted reports was the manner in which the GLA adjustment is calculated would you deny or approve the appraiser?

I don't know your standards, but the transgression does not seem to me to be all that egregious. If you don't want adjustments made that way and the rest of what the guy did is OK, what's the beef? The guy just carried the fable into its next level and deducted 100 SF from all of the comps. A logical deduction from what might be a drivel standard in the industry. There is some of that drivel around if you haven't noticed. Besides if he was consistent you've still got a pretty good comparison, although the bottom line may be somewhat conservative. That might be a good thing.

I know I have heard from multiple sources, this idea that a 100 SF adjustment is not supported by the market. I think could find you somebody who would do it also. So, so much for the peer deal. I don't know about the users of reports, but my guess is you would get a blank stare if you asked. So that leaves you. What are your guidelines?

Personally, I think the standards we know about in SFR mortgage appraising are so obscure as to be almost non-existent particularly with respect to 100 SF adjustments in the sales approach. If the rest of the report is OK, then were is your support to turn the guy down. I had a "national reviewer" (they bestow titles on these people-I look forward to being reviewed by a duke or duchess) tell me the other day that my market couldn't be inclining in value (even though I printed her out an unedited chart so she could see it was not). Her reason; some markets were declining. She in Minnesota, me darned near to New Mexico in the mountains. I told her she couldn't find my market with both hands and she passed the report on to whomever it was she thought is the client.

If the guy is honest he is most likely teachable. If you must, tell him to document the market stuff he is using if he is going to do that 100 SF shuffle, particularly on the lower end stuff.

As far as I am concerned, one sixteenth of an ounce of communication and education is worth 50 pounds of sanctions right now for something like this. Focus on elimination of the lying assholes.

Edd Gillespie wrote:I don't know your standards, but the transgression does not seem to me to be all that egregious. If you don't want adjustments made that way and the rest of what the guy did is OK, what's the beef? The guy just carried the fable into its next level and deducted 100 SF from all of the comps. A logical deduction from what might be a drivel standard in the industry. There is some of that drivel around if you haven't noticed. Besides if he was consistent you've still got a pretty good comparison, although the bottom line may be somewhat conservative. That might be a good thing.

I know I have heard from multiple sources, this idea that a 100 SF adjustment is not supported by the market. I think could find you somebody who would do it also. So, so much for the peer deal. I don't know about the users of reports, but my guess is you would get a blank stare if you asked. So that leaves you. What are your guidelines?

Personally, I think the standards we know about in SFR mortgage appraising are so obscure as to be almost non-existent particularly with respect to 100 SF adjustments in the sales approach. If the rest of the report is OK, then were is your support to turn the guy down. I had a "national reviewer" (they bestow titles on these people-I look forward to being reviewed by a duke or duchess) tell me the other day that my market couldn't be inclining in value (even though I printed her out an unedited chart so she could see it was not). Her reason; some markets were declining. She in Minnesota, me darned near to New Mexico in the mountains. I told her she couldn't find my market with both hands and she passed the report on to whomever it was she thought is the client.

If the guy is honest he is most likely teachable. If you must, tell him to document the market stuff he is using if he is going to do that 100 SF shuffle, particularly on the lower end stuff.

As far as I am concerned, one sixteenth of an ounce of communication and education is worth 50 pounds of sanctions right now for something like this. Focus on elimination of the lying assholes.

I did not feel, in the case of the reports I read, it created anything I considered misleading or did I think it made the report less than credible. I do not do it that way, but that is me and my method. My "old" mentor(s) always told me to remember that you may go around the tree on a different side than they did, but the result should be the same or very similar--we both got around the tree. I approved the appraiser (after contacting and inquiring) and asked for verbiage in the future reports, so as anyone reading the report could/should/would have an understanding as to what was done in the GLA adjustment difference.

The fundamental problem is one of explanation. If they explain everything, they should be nurtured. But an appraiser that relies on canned nonsense to explain how and what and why they did something needs to be reeducated or fired. If I were a bank or institutional reviewer, I would communicate with the appraiser, explain exactly what is needed, and if it isn't forthcoming, put them on the do not use list.

Goodpasture wrote:If I were a bank or institutional reviewer, I would communicate with the appraiser, explain exactly what is needed, and if it isn't forthcoming, put them on the do not use list.

Well you are not, and as far as I can tell an awful of of specific SOW stuff is made up on the fly by clients, reviewers and regulators after the appraisal is complete. Witness my honored encounter with a "national reviewer." You and Annie are not making up SOW after the fact are you? Did you check to see if the client told the appraiser to explain each and every thing or is that something every summary report should automatically contain? Frankly, I want to join the no-boiler plate crowd and then some guy comes along and wants to pay for boiler plate. So what to do, give him a Cadillac for Yugo price? That seems sort of dumb, but if you say so I'll tell the guys that I know that they should do it thata way.

These guys are ordering and paying for cheap and fast little bitty attenuated summary reports that don't warrant much more than boiler plate, but review at the self-contained level. And that doesn't even get to the market analysis stuff. There is something fundamentally unfair going on here.

How can anybody hold a guy responsible for doing some specific thing that nobody ever taught him to do and that has no consensus in the industry? I don't think black & white standards should be applied to services that function in the gray shadows or is it that good explainers should pass and others should not? I think if I explained everything I did in appraising I would have to add disclaimers to most of it. Why can't the appraiser get the benefit of the doubt that is undoubtedly in every conclusion?