Adjustment Misconceptions

by Mike Armentrout

I was recently perusing a social media page that caters to appraisers and came across a thread where a user had posted a grid from a peer report.  Aside from the fact that publicly displaying the work of others can be highly controversial, I reluctantly followed that inner desire to see the carnage that would be wrought in the comments.  It didn't take long before the knives came out, as is the case when online anonymity promotes a less than civil discussion.

Most of the comments centered around the adjustments that were made to the grid.  In the midst of numerous responses, someone had noted that the bath adjustments were "so 2007".  That particular phrase stayed with me for a few days.  Was this a passing quip meant to be humor, or was it a reflection of their real views on adjustments?

Market based adjustments are not commodities that are subject to simple inflationary rates through time.  They are instead typically tied proportionately to the value of the property being appraised.  If the market value of the property increases over time, then of course specific adjustments could increase at a similar pace.  The posted grid had cited sales in the low $30,000 range and a half bath adjustment of $1,500 which was a 5% line item.  Assuming this was correctly derived from market data, the 5% adjustment factor may apply as the value increases but should ultimately be determined by market analysis.

It is possible that a $1,500 half bath adjustment for a $30,000 property in 1998 could remain unchanged for a $30,000 property in 2018.  The adjustment would not automatically go up simply as a function of time.  I'm not sure what kind of adjustment the post response believed appropriate but based on the relatively low value point alone, common sense would indicate a larger adjustment for a single amenity may have priced a typical buyer out of the market.  Further, a 5% half bath adjustment is not a constant.  A half bath adjustment at a $1,000,000 price point may yield a smaller percentage adjustment but a significantly higher dollar amount.

Market adjustments must be based on buyer reaction to a particular feature within a specific market area at a specific time.