Thursday, August 17, 2017

Is the Neighborhood truly similar and competing?

 A few months back, a client asked me how I developed my neighborhood adjustments.  The gentleman had finished reviewing my report and noticed Neighborhood adjustments had been applied to three of the five comparable sales.   I explained to him how the adjustment was developed and sent him a copy of my analysis which was readily available in my work file.  He thanked me several times for my due diligence and then explained the following:

“I’ve asked several appraisers why they don’t take an adjustment for differences in neighborhoods.  I’ve lived in this area for more than twenty years and I know differences exist.  But every time I ask one of our appraisers why they don’t do it, they tell me there is insufficient data to develop the adjustment or there is no way to quantify the adjustment.”

Initially, I didn’t think much of the conversation.  In all honesty, I was just happy I had the support for the adjustment and wasn’t in trouble with my client.  But the more I thought about it, the more I realized how unfortunate the situation really was.  Here is a client who is relying on his appraisers to provide accurate and reasonable values.  But if major adjustments are not being developed or are ignored altogether, how accurate is the value opinion?

This conversation was one of a few motivating factors which prompted me to create a class titled, “Supporting Appraisal Adjustments”. The purpose of this course is to offer help to any appraiser who may be struggling to develop reasonable adjustments in the sales comparison analysis.  Likewise, the class will help an appraiser who is seeking a quicker and/or easier way to develop the various adjustments. 

So how do we determine whether neighborhoods are truly similar and competing and how is the adjustment developed if they are not similar?  Well…you’ll need to attend the class to find out.  But, the good news is the adjustment CAN be developed easily and quickly.  The bad news…it does require some math.  But don’t let that scare you- I’ve developed a spreadsheet that automates the math for you!

Our course offering, “Supporting Appraisal Adjustments”, teaches the logic behind the adjustments and how to develop and support reasonable adjustments.  We walk you through the spreadsheet including how to input the data and how best to apply the results.  Also, we give the spreadsheet to use in your own practice.

Check out our website at to register for remaining course dates/locations in 2017. Do you have an office with several appraisers/brokers? Give us a call and we will be happy to come to you to teach for the day. Look forward to seeing you in class!