Making Good Adjustments

My last article discussed choosing comparable sales in a tough market. As was discussed in that article, in today’s market, it is very difficult to obtain comparable sales and listings that best reflect comparison to the subject. Some sales and/or listings might be older but more similar to the subject; others may be further away in a similar substitute neighborhood. Once you select your comparable sales, the next step is to make adjustments to them.

Whether you are appraising a single family residence or a condominium unit, if your adjustments are either not supported or not reasonable, your value conclusion could be totally wrong. This article explains how to make appropriate and reasonable adjustments for residential properties, both single family and individual condominium units.

Adjustments: Fact or Opinion?
Most adjustments are considered “opinion.” Therefore, anyone can have a difference of opinion as to the amount of an adjustment. However, all adjustments or lack of adjustments must be reasonable. If you choose not to make an adjustment for a lot size difference between one comparable and the subject and if one lot size is twice the size of the other, what support do you have for not making the adjustment? Reasonableness is also a measure with respect to the amount of an adjustment. Say your subject house has a lot size of 15,000 square feet and a comparable sale has 30,000 square foot lot or one that is twice the size. If you choose to make a $1 per square foot adjustment, that is saying that a house with a lot twice the size as the subject is worth only $15,000 more than a house with half the lot size. This is reasonable, perhaps, if the land values in that area are selling for around $2 to $3 per square foot. But would it be reasonable if lot sizes are worth $15 per square foot or more? Any adjustments you make must be considered reasonable.

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