“Insufficient data is available in this market to determine price trends, therefore no time adjustments were applied.”
This is a quote extracted from an appraisal that I was reviewing. It was a small duplex built in the 60’s and the market grid included every duplex purchased in the entire city for the past 6 years. That’s right. All 3 of them. I don’t want to be one of “those” reviewers who asks for unrealistic precision, but there were some gaps in this report that were begging to be filled.
The 1004MC was blank except for one all-caps sentence “THERE IS NOT ENOUGH DATA TO FORMULATE A RELEVANT OPINION OF TRENDS”. With only 3 duplex sales in 6 years, he had a point. But if you are going to employ a sale from 6 years ago without time adjustments, you need more than “I can’t prove it, so no adjustment”.
UAD has “upped” our game. Appraisers are now expected to actually support their adjustments and they know “Big Brother” is watching. As they leave their office at night, they sometimes hear footsteps or a twig break, and they spin around into a jujitsu pose expecting to see the UAD big data machine looming overhead. A common reaction to Big Brother is “I won’t make any adjustment I can’t prove”. The problem is when you don’t make an adjustment, you are making an adjustment.
In the appraisal above, it is not that the appraiser didn’t make an adjustment; he made an adjustment of “0”. If your report has no time adjustment for a sale from 2011, the client doesn’t see “no proof, no adjustment”. The client sees “my research has determined that the subject market is at the same level it was in 2011” (which was, by the way, nearly the lowest point of the Great Recession).
Within the Fannie Mae Selling Guide’s 1370 pages, the words “prove” or “proof” are never mentioned relative to appraisals. The word “support”, however, is used often.
Back to that duplex. There were enough SFR detached sales in that small Nevada town to show prices have increased 43% since 2011. True, those aren’t duplexes, but a broader search of several counties garnered enough duplex sales to demonstrate that duplexes across Northern Nevada have also increased substantially since 2011. We can keep gathering more evidence and none of it will be “proof”, but we are certainly building “support” for time adjustments.
There is no sanctuary in not making an adjustment. The state board would be just as likely to ask you to support your “zero” adjustment as your 43% time adjustment. So be bold. Go with the empirical evidence. And remember:
- Indecision is a decision. No adjustment is really an adjustment of “0”.
- Don’t “prove”. Just “support”. This isn’t algebra class.