We’ve seen requests for additional adjustment commentary rise to be one of our top reasons for an appraisal revision. Lenders are looking for comments that explain WHY the adjustments are applied and HOW they were calculated. Accurate and supported adjustments are key to a reliable opinion of value. To help you avoid frustration, and improve the credibility of your appraisal assignments, please review the best practices below, which when followed will be sure to help minimize appraisal revision requests. While supportive commentary is important for all adjustments, the categories and tips below represent the largest opportunity.
Tip #1: Date of Sale/Time Adjustments
- Adjustment for Market Trend and Contract Date should be aligned
- Explain the source for the market trend
- Include the rate of change if applicable
Acceptable Commentary Example: The time adjustment is applied at +0.3% monthly for the contract date difference of more than 3 months according to 1004MC Data. This was additionally supported with paired sales data (Comparable 1 and 3).
Tip #2: Location/Site/View Adjustments
- Explain when site topography, front footage or location influences (railroad tracks, commercial, crossing boundaries, distant) are present.
- Include comments to explain if there is +/- impact on value, as a result of the location/site/view.
- Discuss how the +/- impact or lack of impact was determined.
Acceptable Commentary Example: The subject is located directly across from commercial which does appear to have a negative impact on value and marketability that comparables 1, 2 and 3 do not experience. Comparable #4 is in similar proximity to commercial as the subject with commercial across the street and was used in paired sales analysis to determine the adjustment rate.
Tip #3: Quality of Construction/Age/Condition Adjustments
- Condition/Quality ratings for the subject and comps should align with available photos/comments. (Lenders are increasingly reviewing interior photos of comps.)
- Adjustment commentary for quality should indicate specific materials of construction (hardwood floors, granite counters, custom features).
- Condition commentary should indicate any wear and tear, when the home was last updated, and which materials were updated.
- Commentary should indicate HOW the adjustment was calculated.
Acceptable Commentary Example: Sale 1 was adjusted for condition since the kitchen was not updated within the last 5 years and the subject’s kitchen has been updated. Sale 3 was adjusted for condition due to new flooring in the living room and kitchen, new kitchen cabinets and countertops. Matched paired analysis was used to determine the adjustment using Sales 2 and 4 (similar condition as the subject) as a baseline.
Tip #4: Room and GLA Adjustments
- Include comments to explain how GLA adjustments were calculated.
- Ensure adjustment figures are sufficient and supported.
Acceptable Commentary Example: GLA and bathroom adjustments were based on paired analysis with Sales 1 and 2 at a rate of $40/sq ft and $10,000 per bath.
