The Logic of
Valuation Adjustments
No two homes are identical. Even in the same neighbourhood, homes differ in size, layout, condition, age, lot characteristics, and interior features.
Why This Matters
Adjustments are one of the most scrutinized parts of any appraisal. They reveal whether the appraiser understands the local market and whether the final value conclusion is credible.
The Impact of Clear Adjustments
Clear and consistent adjustments protect the integrity of the appraisal, ensuring the final value is defensible to even the most thorough underwriter.
Appraisal Selection Hierarchy
Core Comparable Selection Criteria
- School districts & traffic patterns
- Neighborhood boundaries
Appraisers aim to find the homes that require the fewest and most logical adjustments. By matching these seven core criteria, we ensure the final valuation is defensible, consistent, and reflective of market reality.
What Makes a Comparable Invalid
Not every sale qualifies, even if it is close by. These "outliers" are filtered out to prevent market distortion.
Distress & Power of Sale
Transactions where the seller is under duress or the bank is liquidating the asset. These often sell below market value due to urgency or property condition.
Off-Market & Private Deals
Sales that never hit the open market lack "verified exposure." Without competition, the price may not reflect true market equilibrium.
Unusual Motivations
Sales between family members, "sweetheart deals," or unique corporate transfers where the price is not "arm's length."
Unverifiable Data
Properties with incomplete records or upgrades that cannot be confirmed through inspection or secondary data sources.
Non-Typical Circumstances
Properties with legal encumbrances, severe zoning issues, or unique environment factors that do not reflect normal market behaviour.
How Appraisers Evaluate Adjustment Readiness
📊 Quantifiable Evidence
Can the difference actually be measured? Appraisers look for clear data to assign a specific dollar value to a feature or condition difference.
🤝 Market Recognition
Does the average buyer actually care? An adjustment is only made if the market historically shows a willingness to pay more (or less) for that trait.
🗺️ Local Patterns
Does the adjustment fit the neighborhood? Values for a "finished basement" or "extra garage" vary wildly between urban cores and rural outskirts.
✅ Credibility Check
Does the change keep the comparable credible? If the adjustment is too large, the comparable is discarded in favor of a more similar sale.
🏗️ The Goal: A Supportable Grid
A strong comparable is not identical. It is simply close enough that its differences can be corrected logically to build a defensible final value.
FAQ
Common questions regarding comparable selection and market data.
Older sales may not reflect current market conditions. If they are used, the appraiser needs strong evidence to adjust them forward or backward in time to account for market shifts during the intervening months.
No. Listing prices show seller expectations, not market proof. Because listings haven't been tested by a final transaction, only closed sales can be used for primary valuation support.
Different appraisers may prioritize different criteria (such as proximity over age) based on what they believe provides the strongest support for that specific property. As long as the reasoning is sound and market-backed, more than one set of comparables can be correct.
Get Expert Guidance Today
If you want expert guidance before ordering an appraisal, or you have questions about how comparables will influence your property value, our team is here to help.
