How do appraisers adjust for dissimilar square footage and quality? I know the square footage isn't a $1:$1/sqft ratio (first 1500 is more valuable than the second 1500). Comps are really lacking and trying to make sense of someone's high price.

Usually you look at it as a $/improved square foot contribution. For example, if the estimated contribution is $25/sf, and the difference between the comps is 200 square feet of improved area, then the adjustment would be $5,000 (200 sf X $25/sf). That's a simplistic approach to it, but that is usually how it is done.

A rule of thumb is about 50% of the price per square foot of the lowest comparable sale. For example, if you are using 4 comparable sales and they sold for $110/sf, $104/sf, $102/sf and $100/sf, the lowest is $100/sf. The adjustment would be about $50/sf, and additionally, I would round that down to the nearest $5. If $102/sf is the lowest price per sf, comes out to $51/sf, which would round down to $50/sf.

Sometimes this is way off if the land values are higher than typical. For example, when appraising a 1,500 sf house on 10 acres, the land value (%) is way more than what it would be for a .12 acre lot in a starter neighborhood. Therefore, the value of house is a smaller % of the total and the adjustment for the size of the home is smaller.

I've started using an appraisal program that will crunch numbers and it will provide multiple answers based on different methods of calculating the value.

Some of the methods used for this are matched pairs, the allocation method, the extraction method, and regression. The program might offer something like this:

Allocation - $60/sf
Extraction - $62/sf
Matched Pairs - $59/sf
Regression - $30/sf

It appears that the Regression opinion is an outlier and the adjustment should be $60/sf.

Sometimes the different options are much less consistent and the appraiser will have to decide which is the better option. In this case, the best course of action is the use the adjustment that brings the adjusted sale prices of the various comparable sales closer together.

If $30/sf moves the adjusted sale prices further apart and $50/sf brings them to a very nice grouping, then $50/sf is the more accurate adjustment.

Hopefully, this helps clarify the issue.

aggie appraiser said:

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A rule of thumb is about 50% of the price per square foot of the lowest comparable sale. For example, if you are using 4 comparable sales and they sold for $110/sf, $104/sf, $102/sf and $100/sf, the lowest is $100/sf. The adjustment would be about $50/sf, and additionally, I would round that down to the nearest $5. If $102/sf is the lowest price per sf, comes out to $51/sf, which would round down to $50/sf.

Sometimes this is way off if the land values are higher than typical. For example, when appraising a 1,500 sf house on 10 acres, the land value (%) is way more than what it would be for a .12 acre lot in a starter neighborhood. Therefore, the value of house is a smaller % of the total and the adjustment for the size of the home is smaller.

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Thanks for your response. Couple questions:
1. If I'm understanding your first paragraph,
Subject: 1500 sq ft.
Comparable: 2500 sq. ft. sold for $400,000

Comparable $400,000 / (1.0 * 1500 sqft + 0.5 * 1000 sqft) = $200 / sqft
Subject: 1500 sqft * $200 = $300,000

2. Both of the houses are on large lots. Subject is 2.5 acres and comparable is 3 acres. A 3 acre lot only sold for $200,000. Is the proper approach to subtract out the land value and use the above method to determine $/sqft?

Comparable house only: ($400,000 - $200,000 lot value) / (1.0 * 1500 sqft + 0.5 * 1000 sqft) = $100 / sqft
Subject: 1500 sqft * $100 + $200,000 * (2.5 acres / 3 acres) = $316,667

Obviously I'm not trying to truly "appraise" the house, but didn't want to pursue this house if it won't appraise.

This problem is more difficult than the basic math that has been shared. Let me add this disclaimer, just so I am clear and not misleading you. We are discussing methodology of solving appraisal problems and using your example, we are discussing ways determine adjustments. I'm not acting as an appraiser in this case, but just discussing appraiser techniques. I have not seen the subject property and can't make specific judgments.

Obviously, the SF difference in these two properties is significant. The difference is so large that I would try not to use it as a comp. If there not any other comparable sales available, and I would extend the search area out (especially if this a somewhat rural area) several miles.

It would make sense to use something like this if... other similar sized comparable sales are found, but all of them are on much smaller lots. This sale could be used to help support a large site adjustment for the comps that are similar to the subject in square footage and location, but on small suburban lots.

To get a good idea of the lot value, I'd try to find about 3 2-3 acre lots and find a place in the middle that makes sense. Maybe one sold for $200K, but the other 2 sold for $150. I would put the value nearer $150. On the other hand, if you found 2 at $200K, and 1 at $180K, I would value the lot close to $200K. I would be careful about using 1 comp to determining any value. You should be able to find plenty of support if that is really the market value.

Back to your question.

1.No, that's not how I intended to explain it. Again, the difference in these two is too large and I would expand my search area to find properties that are more similar to the subject. The math is easy enough.

Subject 1500 sf
Comp 1700 sf sold for $250,000 or $147/sf
Half of $147 is $73.5, which I would round down to $70/sf.
The difference in the two is 200sf x $70/sf equals a negative $14,000 adjustment to the comps sale price.

$250,000 - $14,000 = $236,000

The adjusted sale price is $236,000. Then start working out any other adjustments. If the subject is superior, then the adjustment is added. If the subject is inferior, subtract the adjustment.

The subject has a workshop which you value at $5K, and comp 1 does not. The subject is superior. Add $5K to comp 1's adjusted sale price.

$236,000 + $5,000 = $241,000

Comp 1 is on 2.5 acres vs 2 for the subject. The adjustment is determined to be $25,000. The subject is inferior so subtract the adjustment from the updated adjusted sale price.
$241,000 - $25,000 = $216,000

Follow that procedure for each significant factor and multiple comparable sales to reach a value.

Again, I would use 3-6 comparables and would try to find comps that are closer in size.

In a case where you are dealing with acreage property it is ok to extend the search area beyond what is normally used for suburban or urban appraisals. Sometimes, you have to go several miles to find comps. At times we catch some flack for it, but it is better to have similar comps from farther away than making very large adjustments for bad comps that are close.

Hopefully this helps.

I have property in many counties including Brazos. There is no rationale for BCAD. They will just move it up 10% per year because the law says they can. They make you appeal. It is a kangaroo court and the taxing authorities love it for they can then claim they did not raise your taxes. Liars they are for the tax amount went up due to escalated appraised value.

The legislature has failed to fix the problem. No guts there. Just another form of income tax. Property taxes are the most dishonest form of taxation in the entire state. One really gets hosed when it is a 2nd home for the school district gets huge benefits.