Reconciling Sales Comparison When Net Adjustments Look Small but Gross Adjustments Are Large
An appraiser is preparing a purchase-money appraisal of a 1,850 sf, three-bedroom ranch on a 0.24-acre lot. The contract price is $418,000. Supported adjustments are $80/sf of GLA, $9,000 per garage bay, $35,000 for a finished basement, $20,000 for backing to an arterial, $3,500 for 0.04 acre of lot area, and market conditions of 0.33% per month. Four sales are available: C1, closed two months ago at $418,000, 1,850 sf, two-car garage, seller paid $21,000 of buyer costs where $6,000 is typical; C2, closed five months ago at $395,000, 1,780 sf, 0.28 acre, backs to an arterial; C3, pending at $429,000, 1,900 sf, three-car garage, six days on market, terms unverified; C4, closed three weeks ago at $440,000, 1,850 sf, finished basement, relocation sale confirmed arm's length.
1. Prepare the adjustment grid, compute each adjusted sale price, and comment on whether net or gross adjustment size should drive the weighting.
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| Element | Subject | C1 | C2 | C3 | C4 |
|---|---|---|---|---|---|
| Sale price | - | $418,000 | $395,000 | $429,000 | $440,000 |
| Concessions | - | -$15,000 | 0 | ? | 0 |
| Market conditions | - | +$2,660 (x1.0066) | +$6,518 (x1.0165) | 0 | +$1,012 (x1.0025) |
| GLA | 1,850 | 0 | +$5,600 | -$4,000 | 0 |
| Garage | 2-car | 0 | 0 | -$9,000 | 0 |
| Basement | none | 0 | 0 | 0 | -$35,000 |
| Lot | 0.24 ac | 0 | -$3,500 | 0 | 0 |
| Location | typical | 0 | +$20,000 | 0 | 0 |
| Adjusted | $405,660 | $423,618 | $416,000 | $406,012 | |
| Gross adjustment | $17,660 | $35,618 | $13,000 | $36,012 |
Net versus gross. C1 and C2 have similar net adjustments, but C1's gross adjustment is about 4% of price and C2's is about 9%, concentrated in a single $20,000 location line drawn from a general impression rather than paired data. Net adjustment size is a poor screen; gross adjustment size and the number of independent line items indicate how much of the sale price must be re-engineered and how much error is being imported. C1 also requires the smallest dollar concession deduction and closed most recently, which makes it the most reliable indicator of the subject.
2. Reconcile the adjusted values to a final opinion and state how each comparable should be weighted.
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Closing C1 and C4 bracket the range tightly at $405,660 and $406,012 despite very different raw prices - a good sign that the adjustments are broadly calibrated. C4 needs a single large, well-supported basement adjustment; C1 needs a concession adjustment and a short time adjustment. Both are verified, arm's-length, closed sales, so they carry the most weight: roughly 40% each.
C3 is pending, unverified on terms, and six days on market - a listing price, not a transaction. It gets secondary weight (about 15%) and only after confirming the contract terms and that no concession is embedded; if it cannot be confirmed, it should be discussed and excluded from the reconciliation.
C2 gets the least weight (about 5%) despite its low adjusted net. It is the oldest sale, required a 9% gross adjustment, and the $20,000 location adjustment is the largest single line and the least supportable - it should be tested against a paired sale or a market extraction before being used at all.
Reconciled value: about $406,000 to $412,000, most probable $408,000. The appraiser should note that C1's unadjusted price exactly equals the contract price, which suggests the parties relied on that sale without adjusting for the $15,000 excess concession - a plausible explanation for a contract price slightly above the indicated value.
3. The indicated value is below the $418,000 contract price. Explain how the appraiser should handle that result, including what belongs in the report and what must be avoided.
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A value below the contract price is a normal outcome and not evidence of error. The appraiser must:
- Report the actual opinion of value. The contract price is not a target, a ceiling, or a floor; it is data. Adopting $418,000 to please the parties converts the appraisal into advocacy and violates the requirement to develop and report an unbiased opinion.
- Analyze the contract as required, including any concessions, unusual seller motivation, or non-market terms, and state whether the price appears to have been affected by them.
- Explain the reconciliation. Show why the weight went to C1 and C4 rather than C3, and why the C2 location adjustment is not reliable enough to carry the value higher.
- State the exposure time supported by the data, since a value below the recent contract price is consistent with a market where the parties may have overpaid.
- Avoid offering a second, higher number for a different purpose, providing a range in place of a point estimate, or privately telling the loan officer that the report can be revised once a better comp is supplied.
The appraiser should also consider whether the gap signals a real market condition - for example, that contract prices in this subdivision are trending above the indicated value - and, if so, support that with a paired analysis rather than an assertion. If the appraiser later revises the opinion, the change must rest on new evidence documented in the workfile, with the reason stated in the report, not on the lender's disappointment.