Let's look at just a few examples from this appraisal report. First, look at the line that shows "Actual Age." Notice in this report there is a difference between the subject property and Comp #1 of eight years, for an adjustment of (-$3,200). Comp #2 shows a seventeen year difference, of (-$6,800). And, Comp #3 shows a age difference of twenty-three years for an adjustment of (-$9,200). OK. Got out your calculator?
There are no definitive guideline for age, condition, square footage, amenities, or any other adjustments for comparable sales. The amounts are left up to the discretion of the individual appraiser and the local marketplace. Pricing real estate is an art. While the "price-per-square-foot" formula offers a good starting point, it is NOT the be all, end all, absolute best way to calculate home values. Like most of the real estate and appraisal industries, "it depends" applies to so many situations. Real, breathing, live, thinking people, have to make adjustments based on local knowledge. A computer will NEVER provide consistently accurate real estate values. No opinion in that, it's just the facts. Any mathematical formulas, based on inaccurate information, can only provide inaccurate conclusions. Computers depend of the information in public records and that square footage information is flawed. The public records system has no involvement in the real estate information system. It is not their job. Accurate and detailed square footage information is just not possible without entering the dwelling and the tax department does not need exact details for their purposes. The real estate industry is simply taking the tax department's information, created for their use only, and trying to force it to work in the MLS information system. Why? So, agents don't have to measure houses and assume the responsibility. At least that's been the thought process so far. The whole process if flawed and it was not designed that way. The entire MLS was created to be the information source of real estate professionals. Not to use the data provided by the tax department. That's why the MLS was needed, to replace flawed data. Yet, here we are a hundred years later back to square one.
Are the above adjustments perfect? It depends. But, regardless of whether the adjustments are correct for a specific market, the best chance at finding at a home's value is by using a licensed appraiser, who has been well trained and tested.
How can an underwriters question specific adjustments, when there is no exact basis or examples on how it is created? It's no easy task. At the end of the day, there is one line they can look at to see if the subject property is similar in value to the comparable sales. The line that says "Sales Price/Gross Liv. Area." Simply "price-per-square-foot."
In our price-per-square-foot world, the square footage information we use every day changes home values. The example above shows exactly how subjective the appraisal industry can be. Whether the square footage of a lot or a house, there is no set in stone valuations or adjustments. We must fix what we can, and we can fix the one number at the start of every home valuation. Square footage details must be provided by trained professionals and NOT taken from the local tax department...