Knowledge Base

How does Appraise-It Pro calculate market conditions adjustments?

As of version 2.5, Appraise-It Pro replaces the old "time" adjustment with multiple market conditions adjustments.

You can choose to use a percentage-rate adjustment on either a monthly or yearly basis, or a flat-rate adjustment per day. These options are mutually exclusive: if you activate the flat-rate adjustment, the percentage-rate adjustment will be deactivated, and vice versa.

  • The percentage-rate adjustment with Year checked is equivalent to the old time adjustment.

Percentage Rate

Appraise-It Pro now allows you to specify whether your percentage rate is a monthly or yearly rate. Either the Month or Year box must be checked for the adjustment to calculate.

  • The percentage-rate calculation requires the comp's sale price and the effective date of the appraisal to be populated in addition to the subject's and comp's contract dates.

When using the percentage-rate adjustment, you also have the option of using a simple growth formula or a compound growth formula. By default, the simple growth formula is used.

  • You can switch to the compound growth formula by selecting File, then Settings, then Form Processing and selecting the Use compound growth instead of simple growth in market conditions percentage adjustments option.

Both formulas use the same variables:

R = the percentage rate specified on the adjustments addendum
D = number of days between the effective date of the report and the comp's contract date
P = the comp's sale price

The simple growth formula is D × (R / 365) × P. The compound growth formula is [(1 + (R / 365))^D − 1] × P.

  • For the purposes of calculation, the percentage rate on the adjustments addendum is converted into a decimal rate, i.e. 2% becomes 0.02.
  • If you select the Month box, Appraise-It Pro automatically converts the monthly rate into a yearly rate for the purposes of calculation.
    • When using simple growth, the monthly decimal rate is multiplied by 12 to obtain the yearly rate, i.e. 0.02 becomes 0.24.
    • When using compound growth, the monthly decimal rate is added to 1, then raised to the power of 12, then 1 is subtracted, i.e. 0.02 becomes 0.27.
  • If you want seller concessions subtracted from the sale price when calculating this adjustment, go to File, then Settings, then Form Processing and select Deduct seller concessions before calculating market conditions percentage adjustments.
  • In UAD reports, UAD format only allows for the month and year and not the full date for the contract date. Since a specific day is not available, Appraise-It Pro calculates based on the first of that month.

Using the default simple growth formula and an effective date of March 15, 2022:

R = 0.021 × 12 = 0.252
D = 3/15/2022 − 11/1/2021 = 134
P = 200,000

134 × (0.252 / 365) × 200,000 = 134 × 0.00069 × 200,000 = $18,503

Flat Rate

The flat-rate adjustment is much more straightforward: the difference in days between the subject's Effective date, and comp's contract dates is calculated, and the result is multiplied by the flat rate unit value specified on the adjustments addendum.

  • In UAD reports, UAD format only allows for the month and year and not the full date for the contract date. Since a specific day is not available, Appraise-It Pro calculates based on the first of that month.
  • The Effective date will still calculate from the day

An example using an effective date of March 15, 2022:

3/15/2022 − 11/1/2021 = 134
134 × 137.50 = $18,425

List-to-Sell Ratio

This adjustment is specific to UAD Sales Comparables and is only available there.

If you are including Active, Expired, or Withdrawn listings in your UAD sales comps grid and know your market's list-to-sell ratio, you can enter it on your automatic adjustments addendum and Appraise-It Pro will automatically apply an appropriate adjustment to bring your listing's price in line with its predicted sale price.

  • If your jurisdiction does not disclose the property's contract price until after the sale settles, you can select Apply to Contract to treat sales comps with the status Contract as listings for the purposes of this adjustment.

 

 

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Last Updated
March 21, 2022