Using a national sample of approximately 1.3 million appraisal reports between 2012 and 2015, new analysis from CoreLogic shows which home features are being adjusted the most frequently, as well as which are being adjusted for the most money, thereby having the greatest impact on appraisal values.
So what is being adjusted and how often? CoreLogic analysis reveals that some type of adjustment was made on 99.8 percent of appraisal reports reviewed. Figure 1 shows the various features adjusted on appraisal reports in relation to how often that adjustment was made, as well as the financial impact, or value influence, it had on the appraisal report.
Differences in Living Area was the most adjusted feature at 96.4 percent. Other features that were adjusted on 50 percent or more of appraisal reports were Room, Car Storage, Porch and Deck, Overall Condition and Site Area. It is significant to point out that the frequency of an adjustment is indirectly correlated to the financial impact, as four of the top five most adjusted features resulted in relatively low average dollar adjustments. For example, Room adjustments were very common at 70.4 percent but had minimal value influence, recording an appraisal adjustment of only $2,246 on average. Conversely, a Quality Rating adjustment had the highest value influence, with an average adjustment of $14,748, but accounted for only 18.7 percent of all adjustments.
Although the adjustment features that result in the highest value adjustment levels (Condition, Quality and Location) are harder to quantify, appraisers are professionals who can do this and adjust their reports appropriately to reflect the most precise appraisal for the home.
My comment: Interesting results. The actual dollar amounts don’t mean much as they are aggregated from all over the country. But, the frequency of adjustments and their relative amounts are worth checking out. What I see is that too many adjustments are being made for items that don’t affect value much and are hard to support. Savvy appraisers are not making adjustments for items such as porches and deck. Many are putting 0 in the grid to indicate that no adjustment is needed. Some appraisers only make adjustments for market conditions and GLA. Other differences, such as condition and location, are considered in the reconciliation. For example, if the subject has superior condition as compared to the comps, a value on the higher end of the range of adjusted comps is selected.
Fannie is focusing on adjustments in the new CU 3.0. They have been focusing on Q and C ratings. I will be writing about what all this means in the November, 2015 issue of the paid Appraisal Today.
Click here to see the adjustments graph and full article. Very interesting and worth checking out.