How do you determine the +/- adjustments of a comp

Question

I've often wondered exactly how an appraiser comes up with the adjustment values that are used when comparing properties.  For example how much credit or deduction is used for a 1/2 bath, more or less square footage, an extra bedroom etc...etc....

I've seen an adjustment value of $15/sq ft of space but not sure where that figure comes from or if it can be applied to all appraisals. Does it only only apply to a certain area?

Is there a standard adjustment guideline or is it just up to the individual appraiser to come up with their own adjustment values?

Ryan Lundquist · Answer

Good topic Jason Walkowicz. As an appraiser, I'll agree with others that there is definitely no book of standard adjustments. Why? Because each market is different and adjustments are based on the each distinct market. Any adjustment should reflect the reaction in the market from buyers to the difference at hand. For instance, if the subject property was 1300 square feet and a virtually identical house was 1400 square feet and sold for $5,000 more, this means the extra 100 square feet is only worth $5,000. While it would cost far more to actually add on an extra 100 square feet, the adjustment is only $5,000 because that's really what buyers are willing to pay based on pairing together sales and doing analysis. Similarly, if we see houses in the market with remodeled kitchens sell for X amount more than houses without kitchens, then X becomes the adjustment in that case. The same holds true for a house with a built-in pool selling for $10K more than a house without a pool.

Does this make sense? Let me know if you have any questions. Realistically though, some adjustments you'll see in appraisal reports are bogus because they're just made-up instead of market-derived.

Karen Rittenhouse · Answer

Best to ask your local appraiser as this will vary based by so many things including the usual:
location
condition
house value (we don't get as much for a bathroom remodel /sq.ft. on a $50,000 house as on a $250,000 house)

Tons of variables. Check local appraisers. They are usually very forthcoming with their parameters.

Ryan Lundquist · Answer

No problem Jason Walkowicz. I'm around in case you every have questions. Take care.

Jason Walkowicz · Answer

Ryan Lundquist  thank you Ryan. That explains it perfectly.

Jason Walkowicz · Answer

Excellent, thank you. I think that answers my question about there being any "standard".  Looks like I need to talk to the appraiser and see if they will divulge this info to me.

Sharon Vornholt · Answer

Exactly what Karen Rittenhouse said.

Sharon

Ramon Jenkins · Answer

Check this thread out :
www.biggerpockets.com/forums/311/topics/73160-primer---estimating-arv

Maybe some informal training such as Brandon 
multi-family webinar would benefit everyone ?

Can a few of below mention provide some 
wisdom on this topic : Brandon Turner, Ken Corsini, Karen Rittenhouse, Sharon Vornholt,@Cris Clothier, @Danny Johnson, @Clay Huber,@Michael Quarles, @Jerry Puckett, and @Brain Burke

Well you tell this important 
topic for me 
- Call on a few of biggerpockets 
  big dogs for wisdom

Derek Faller · Answer

Generally appraisers have an amount that each of the items is worth in a specific area. These numbers are specific to the area the homes are in and most appraisers use the same numbers. Appraisers usually won't share what these numbers are to non-appraisers.

For those of us that don't have the secret appraiser calculations and numbers, you just have to compare comps that have and don't have the extra room and see what the difference in price is to get an idea of what it is worth. After a while if you work in the same area and run a lot of comps you will get an idea of what these rooms are worth in each area.

Of course what things are worth to investors and realtors aren't always worth what appraisers think they are.

Tom Goans · Answer

Honestly Jason, I do not know if there are standards. I do know appraisals are the appraiser's opinion. You will find some lenders prefer to rely one specific appraiser's opinion other others because they find that appraiser's opinion more in tune with their concerns.

Is the purpose of the comps and appraisals is to that you stay within the accepted mold for a neighborhood with your rehabs?

Jason Walkowicz · Answer

Tom Goans I understand.  I am curious for my own purposes of evaluating comps for rehab projects that I'm working on.  I'd like to get some high level information so I can better evaluate what the comps are telling me.  From what you are saying it seems as if each appraiser comes up with their own adjustment values that they use.

Are there any "standard" amounts?

How do you determine the +/- adjustments of a comp

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