The Adjustments That Swallowed the Comparable
An appraiser is valuing a 2,050-square-foot ranch with a two-car garage on a 0.31-acre lot. The best comparable is a 1,780-square-foot ranch with a one-car garage on a 0.28-acre lot that sold for $385,000. The appraiser's grid shows: +$54,000 for the 270-square-foot difference at $200 per square foot, +$18,000 for the garage, +$4,000 for the lot size, and −$7,000 for a superior condition adjustment. Net adjustment is +$69,000, producing an adjusted value of $454,000. The appraiser then reconciled the subject at $452,000, essentially matching the single adjusted comparable. The report's market conditions section says values in the neighborhood have been flat for two years. The subject's contract price is $415,000, and the appraiser describes it as "consistent with the conclusion."
1. Evaluate the adjustment methodology and the size of the gross adjustment relative to the sale price.
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The gross adjustment is $54,000 + $18,000 + $4,000 + $7,000 = $83,000, which is about 21.6% of the $385,000 sale price. That is large enough to warrant scrutiny, and the pattern is the problem: nearly all of the gross adjustment is positive, meaning the appraiser is adjusting the comparable upward toward the subject in almost every line.
The $200-per-square-foot rate is the core defect. Applying full sale-price-per-square-foot to a size difference is a common error: the marginal value of additional space is almost always less than the average price per square foot, because land, systems, and fixed costs do not scale. Using $200/sf for 270 square feet likely overstates the adjustment substantially. A rate derived from paired sales of differing sizes, or a depreciated-cost or contributory-value approach, would be more defensible.
The garage adjustment of $18,000 for a one-car to two-car difference should likewise be market-derived. The lot adjustment is minor and plausible. The condition adjustment is the only negative line, and it runs the wrong way if the subject is the newer or better-maintained property - the appraiser should confirm which property is superior and document it.
Finally, reconciling to a single comparable at essentially its adjusted value is not a reconciliation; it is a restatement. A conclusion needs a range and a reasoned selection within it.
2. The contract price is $415,000 and the appraiser calls it consistent with a $452,000 conclusion. What should the reviewer conclude, and what does the gap suggest?
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A $37,000 gap - about 8.9% of the contract price - is not "consistent." A difference of that size requires analysis, not a sentence of reassurance. The reviewer should treat the gap as evidence that the adjustment grid is overcorrecting, and the direction supports that reading: the subject is improved relative to the comparable on nearly every line, and the appraiser pushed the comparable up by 21.6% of its price to get there.
The reviewer's likely findings:
- The $200/sf size adjustment is unsupported and probably too high; a lower marginal rate would pull the indicated value down toward the contract price.
- The single-comparable reconciliation is too thin to support any conclusion, let alone one 8.9% above contract.
- The report asserts market conditions are flat, yet the conclusion implies the subject is worth far more than the nearest sale after adjustment - an internal tension the report never resolves.
What the reviewer should require: an expanded grid with at least two more comparables, market-supported adjustment rates, and an explicit analysis of the contract price. If the contract reflects concessions or non-market motivation, that must be identified. If it reflects the market, the appraisal is high and the reviewer should say so. The reviewer should not simply average the two figures; the point is to determine which evidence is reliable.