Appraisal Adjustments;
How Appraisers Determine Value

ADJUSTMENT TO SINGLE FAMILY HOMES:

$0-200,000 – the adjustment will likely start between $20.00 and $30.00 per foot

$200,000 to $400,000 – $30.00 to $50.00 per foot

$400,000 to $700,000 – $50.00 to $100.00 per foot

Over $700,000 the range is likely between $75.00 and $200.00

Bathrooms:

The adjustment is typically $3,000 to $4,000 for a full bath

$1500 to $2,000 for a half a bath.

Garages:

This too depends on the value of the home and location. Typically for a suburban home the value of the garage is going to be approximately $4,000 to $5,000 per bay. Tandem bays are typically adjusted at half the value of full bays. In markets like Cherry Creek, Downtown and Capitol Hill were parking can be difficult, the bay adjustment is closer to $10,000 per bay.

The following are items that are in near every home but do not have a large impact. Items like central air conditioning, double pane windows, landscaping and decks/patios all add value, but they are items that can be changed after the home has been purchased. Windows add value but the addition is minimal as owners can replace one window at a time, over time.

Central Air: $1,000 to $2,000

Double Pane Windows: $1,000 to $3,000

Decks/Patios: $3,000 to $5,000

Basement and finished basement area also depends on the value of the home. Walkouts typically bring $3,000 to $10,000 depending on the overall value of the home. Most appraisers adjust $10.00 per foot plus an additional $10.00 per finished foot for homes under $200,000. The range is typically $12.00 and $12.00 for homes in the $200,000 to $350,000 range, and $15.00 to $25.00 for $350,000 and up.

Homes without basements can be penalized in the Denver metro area as basements are an expected amenity. The amount a home has to be discounted due to its lack of a basement is typically between $5,000 and $10,000. This premium is after the basement size and finished area have already been adjusted for. Condition and upgrades are typically the two largest adjustments and many appraisers simply combine them into one adjustment. The adjustment is typically not greater than 10%. Condition adjustments range from between $5,000 to $20,000 depending on the value of the home and condition of the exterior, roof, and other systems.

Upgrade adjustments range from $5,000 for a home with only superior flooring to $200,000 for a million dollar plus home that has been renovated in Cherry Hills or Denver Country Club.

Location adjustments are usually pretty easy to make. Take the size and era home you are appraising and look up the median sales price over the past 36 months in your home’s neighborhood, then take the same sized homes and find out the median sales price for the homes in the competing development over the same 36 months. This will let you know if an adjustment is warranted. It may not always give the exact market adjustment but it will let you know if a significant adjustment is warranted.

Time adjustments work similar to location adjustments basing the adjustment on the differences between the median sales prices over the most recent 6 month period as it compares to the median sales price in the prior 6 month period. This will give you the dollar amount increase or decrease. Convert that to a percentage by dividing the difference by the previous 6 month median sale price to obtain the percentage difference. Divide that figure by 12 months to get the per month change in value.

Bedroom adjustments are typically only made when the bedroom count limits the functional utility. A typical suburban home will have between 3 and 5 bedrooms above grade. As long as it has 3 bedrooms I do not adjust, unless the evidence is clear that an adjustment is warranted. Most 3 bedroom homes are considered to be functional. A 2 bedroom or 1 bedroom home will need 2 or 1 bedroom comp. After all the other adjustments are made, the difference between the homes with the similar less functional bedroom count will be clear and the adjustment will be obvious, if it is necessary.

ADJUSTMENT TO CONDOS:

Condos are a bit easier as they typically have model matches from the same builder. Price per sq ft. of a condo tends to be much higher than it is for single family homes. Where a single family home may have no adjustment for gross living differences of less than 100 sq ft, a condo in the same building with only a 10 sq ft difference could sell for considerably more than the slightly smaller unit. I typically will look at the average price per sq.ft. of the units that have sold in a building and adjust for sized based on that figure. I will not go above the figure, but if a condo is selling for $250.00 a foot, my adjustment will most likely be right around $150.00 to $200.00 per foot. $400.00 per foot would most likely be adjusted at $300.00 to $350.00 per foot. Be sure to use condos with the same bedroom count as the differences for bedroom count in Condos can be vast.

If I am appraising a 1 bedroom condo I typically will only use 1 bedroom comps. If I need to use a 2 bedroom unit, the adjustment will be obvious after all the other items are adjusted for. Condo parking adjustments will depend on the location. Suburban units are adjusted around $4,000 to $5,000 per bay with luxury custom condos bring in $10,000 per bay. In Capitol Hill the price is around $15,000 and downtown the price can exceed $30,000 per bay depending on where you are located. Uptown it is about $4,000 to $10,000 depending on the quality and price.

Location adjustments for condos are done in the same way as for single family homes. Basement, condition, upgrades, windows and air conditioning are also nearly the same for Condos as they are for single family homes. A typical balcony will add $3,000 to $5,000 and a large patio are that can accommodate furniture can add $10,000 to $50,000, depending on the value of the home.