USPAP and Relevant Adjustments – TAA Podcast 130

Topics such as USPAP and relevant adjustments can bring out the very worst in appraisers, because of the arguments this topic causes.  This is simply because the science of relevant adjustments is taught only superficially in appraisal school.  Yet we teach it is art, or we do not teach at all.  This podcast is about understanding when adjustments are necessary.  Then its  about understanding why adjustments are necessary.  But the praxis of making them is the subject of another podcast.  There are plenty of them out there (here is one of mine).

So, let’s talk about USPAP and relevant adjustments here.  USPAP does not use the word adjustment or adjustments, thus they are not part of appraisal.  Which leads us to the two questions behind this podcast.  One is “How do I know when an adjustment is necessary?”.  And the second is, “What size adjustment do I make?”.

Please understand the first question is surprisingly easy.  Follow USPAP and relevant adjustments are straightforward.  This easy answer is, “An adjustment is necessary when the micro-market tells us it is”.  Note the micro-market is the sole source of this wisdom, not the AMC, etc.  In this instance, properties that are comparable to and competitive with the subject compose the relevant micro-market.

As to the size of the adjustment, the micro-market tells us that, too.  Usually, the size of the adjustment will be a low-to-high range, from which we reconcile a dollar amount.  Adjustments don’t come from tables or schedules our first supervisors gave out 20-years ago.  Because appraisers deal with market value, the adjustments must therefore come from the market, too.  So, we make adjustments to make sure our value opinions are credible, with their bases in micro-market data.  Such professionalism gives the Public reason to trust us, rather than an AVM.