The art of the adjustment process
Download
1 / 62

THE ART OF THE ADJUSTMENT PROCESS - PowerPoint PPT Presentation


  • 78 Views
  • Uploaded on
  • Presentation posted in: General

THE ART OF THE ADJUSTMENT PROCESS. George Librizzi George Raymond Brown. GOALS. A review of the classical development and application of adjustments in the appraisal process.

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha

Download Presentation

THE ART OF THE ADJUSTMENT PROCESS

An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -

Presentation Transcript


THE ART OF THE ADJUSTMENT PROCESS

George Librizzi

George Raymond Brown


GOALS

A review of the classicaldevelopment and application of adjustments in the appraisal process


This seminaris intended to raise issues and be thought provoking rather than a definitive guide to specific adjustment methodology


What are the Judges saying?

A strong message has been sent to the appraisal community by the courts


It is in your best interest to be aware of the court’s opinions on a particular property type BEFORE appearing before them!

…or your valuation could get

booted out!

https://www.judiciary.state.nj.us/taxcourt/taxcrtopinion.htm


Incompetence?

Lack of supporting evidence?

Or just poor

preparation?

What is the root of the issue?


OUR WORK

SCOPE OF WORK

PERSONAL HISTORY

EXPERIENCE

OBSERVATIONS

WHAT DID WE PREPARE


Super Secret Adjustment Guide


Super Secret Adjustment Sheet – 2013

GBA or SFLA$30 -$130 per Sq. Ft. (except for condominiums)

Heat typeHot water baseboard - $2,500

Forced Air – A/C+2,500

Land$3 per Sq. Ft. (30% of site value)

Land$10,000 per acre (rural home sites)

Condo GBA$110-180 per Sq. Ft.

GRM(Wildwood) 80 – 425 (Stone Harbor)

Cap rate8.0 – 9.0

Fireplace$2,500

Pool$25,000

Basement$5,000

Finished Basement$10,000

Entrepreneurial profit ----- 10 Percent


OVER-COMING THE

PRESUMPTION OF CORRECTNESS

Pantasote Co. v. City of Passaic

The presumption must be rebutted

by cogent evidence that must be,

..definite, positive, and certain in quality and quantity

Presumption remains in effect even if the district used a flawed valuation method


COMMON ADJUSTMENTISSUES

The Principle of Contribution

Customary, Usual & Reasonable

The Sequence

Comparative Analysis


MAJOR SALES COMPARISON TECHNIQUES

QUALITATIVE

QUANTITATIVE

Should be applied first

Justify the reasonableness

Extensive discussion of reasoning

Location = quantitative

It is expected the expert will explain the why’s and wherefores


RISKY BUSINESS

WHEN YOU RELY ON

ONE APPROACH


“Take nothing on its looks; take everything on evidence. There’s no better rule”~Charles Dickens~


  • HOROVITS

VS

LONG BRANCH CITY

(APPELLATE ~ FEB 2014)


a. High value residential in day long trial

b. Named experts; remember your reputation is on trial

c. Quality dispute and bathroom count issue

d. Sales outside of the subject’s taxing district approved

e. Adjustment issues generally are addressed

f. Cost approach completed and ignored

g. Property record card need not be reviewed

h. Plaintiff’s report and testimony “fatally flawed”

I. Appellate court defers to the expertise of the tax court

j. Small, typographical errors do not undercut the report

k. Adjustments must be made to explain differences

l. Attacking evidence post hearing is unacceptable

m. Admitting an expert report and evidence and relying upon it was not an “abuse of discretion” by the trial judge

n. Multiple approaches to value must be reconciled by the court

o. Judge relied on both reports; cherry-picking; trial judge has the discretion to adjust comparable sales after review and consideration of both reports


Matthew Tuck vs West Caldwell

Neighborhood Analysis

Sale price ranges

Values range per unit

Rejection of comparable sales cited

Motion for reconsideration post judgment


Measurements

Suggest a mistake, any mistake

Interior inspections

Assessment records presumed correct

Common types of adjustments

Proper comparable sale selection

Comparable sales grid of plaintiffs’ appraiser

Unit of comparison $/Sq. Ft. of gross living area

Using a size related unit of comparison eliminates the need for size adjustments

vs

Boro of

Franklin

Lakes

Elrabie


More from Elrabie….

Condition v. Quality

Admitting reports (and testimony) into the record

Presumptions of correctness is describe in detail

Burden of proof remains with the plaintiff throughout the trial

The sales comparison approach is the best method of appraising a residence

What spills out of your mouth likely is not retractable; less is more

Chapter 123 is inapplicable in the year of a revaluation

Counter-claims (20 days), should not be made to achieve a tactical advantage

In dealing with the public, government must turn square corners!

Without a claim or counterclaim, the court is unable to increase an assessment in a revaluation year where Chapter 123 is inapplicable


vs

Greenblatt

Englewood


Discrepancy in building area; heated space

Estate sales as market evidence

Burden to prove that a sale is not bona fide falls on the challenger using creditable evidence

Failure to explain adjustments

Facts and data are necessary to support an expert’s opinion

Adjustments must have a foundation in market data; possibly supported by a cost manual

No support for the cost approach, not even a definition for the word ‘area’

Both appraisals tossed due to lack of support for adjustments


Silverman v. Allenhurst

a. Using sales in another competitive districtb. Selective rejection of unsupported adjustmentsc. Judgment based upon a fair preponderance of evidence provided by both partiesd. Cost approach is appropriate for valuing new or relatively new construction since cost and market are more closely related when properties are new; also applicable to special purpose buildingse. The tax court is regarded as an expert; they may pick and choose what they rely upon from the expert’s testimony, reports, and the recordf. The court may not apply its own adjustments without support


Silverman v. Allenhurst

g. Very often “adjustments made to comparable sales are subjective in nature.”h. Excess land substantiation: $1.5 million per acrei. Declining Director’s Ratio equates to an advancing marketj. Errors in the direction of the adjustment, superior or inferior?k. Paired Sales Analysis not included in the report is not consideredl. Unsubstantiated effective age adjustment are unacceptable


DEFENDANTS GRID


PLANTIFFS GRID


JUDGE’S GRID


Bogusevich v. Township of Ocean

a. Subjective nature of adjustments acknowledged

b. No interior inspection of comparable sales conducted

c. No adjustment for bathrooms, redundancy of GLA he says?

d. Exterior photographs helpful

e. GLA and site adjustments rejected due to lack of support

f. Land abstraction example detailed (an example for you to you)

g. No adjustment for basement or basement finish (could be compared with office area in an industrial warehouse)

h. Subject purchase price ignored; expert includes no analysis in report; USPAP error of omission; purchase price could be controlling with support


Common Adjustment Issues

Adjustment Issues begin with Comparable Sales Selection


  • Selected Sales must have the same highest and best use. The sales must be as similar as possible to the subject, reflecting the actions of typical buyers. You must assume the posture of the typical buyer. The goal is to find sales that require little adjustment. Common adjustments should be linked to the buyer’s perspective.

Comparable Sales Selection


  • A Comparable Sale Should be a Realistic Alternative Investment for Buyers in the Subject’s Market

Common Adjustment Issues


Common Adjustment Solutions

Key Terms Relating to the Adjustment Process


Paired SalesMatched Pairs Analysis


Just As a Single Sale Does Not Reflect Market Value

An Adjustment Derived from a Single Pair of Sales is Not necessarily Indicative


COMMON ADJUSTMENTS

Adjustment Tools based upon Market Conditions


Director’s Ratio


LOCATION

LOCATION

LOCATION

Underlying Land Values and their Analysis Substantiate Location Adjustments and Much More!


Market Conditions Addenda


GROSS BUILDING AREA ADJUSTMENTS

CONTRACTOR’S COST


QUALITY

CONDITION

Assessor’s Property Card?


  • 1. Make every attempt to inspect the interior of comps

  • 2. Review the comp sale photos in the MLS

  • 3. Determine the Q&C from the property record card for the subject and comps

  • 4. Last ditch: Make no adjustment for Q & C!


www.building-cost.net


ad
  • Login