Adjustment

Key Takeaways

• Adjustments are always made to the comparable property, never to the subject property being valued.
• If the comparable has a feature the subject lacks, subtract its value from the comparable's sale price. If the comparable is missing a feature the subject has, add it.
• An adjustment is a dollar figure derived from market evidence such as paired sales, not from dividing a sale price by square footage.
• After every comparable is adjusted, the appraiser reconciles the adjusted prices into a single indicated value rather than averaging them.

What It Means

An adjustment is a dollar correction applied to a comparable sale so it lines up with the property being valued. No two houses are identical, so the Sales Comparison Approach fixes that by pricing the differences. If the comparable has something the subject does not, the appraiser subtracts what that feature is worth. If the comparable lacks something the subject has, the appraiser adds it.

The direction confuses almost everyone at first, so anchor it to one rule: the adjustments are always made to the comparable, never to the subject. The subject has no sale price to adjust. That is the number being solved for. The comparables have real sale prices, and each one is nudged toward what it would have sold for if it had been the subject property.

The dollar figures come from the market, not from a rulebook. An appraiser derives them from evidence such as paired sales, where two similar properties differ mainly in one feature. Once each comparable is adjusted, Reconciliation weighs the adjusted results into one indicated value.

How It Works in Washington

In Washington, formal appraisal work is regulated. A person performing real estate appraisal activity is certified or licensed under chapter 18.140 RCW, the Certified Real Estate Appraiser Act, and the work is judged against the Uniform Standards of Professional Appraisal Practice. WAC 308-125-200 states it plainly: the standard of practice governing real estate appraisal activities will be the edition of the Uniform Standards of Professional Appraisal Practice of the Appraisal Foundation in effect on the date of the appraisal report. Nothing in the RCW or the WAC publishes a table of dollar values for a garage bay or an extra bathroom. The standard is about method and support, so a Washington appraiser has to be able to show where each adjustment came from.

Brokers work with the same grid on the listing side. A comparative market analysis uses Comparables and adjustments to reach a suggested list price, and RCW 18.140.020 preserves room for it by allowing a person licensed by the state as a real estate broker to issue a broker's price opinion without appraiser certification, subject to disclosure requirements. A CMA guides pricing. It does not replace the appraisal a lender orders.

Example

An appraiser values a Kent house with 1,850 square feet and a two-car garage. Paired sales in the neighborhood support $60 per square foot of living area difference and $9,000 for a third garage bay.

Comparable A sold for $612,000. It has 1,950 square feet, which is 100 more than the subject, and a three-car garage. Both features are superior, so both come off: 100 square feet times $60 is a $6,000 deduction, plus $9,000 for the extra bay. The adjusted price is $612,000 less $15,000, or $597,000.

Comparable B sold for $580,000. It has 1,790 square feet, 60 fewer than the subject, and a two-car garage. The subject has more living area, so the missing space is added: 60 times $60 is $3,600. The adjusted price is $583,600.

The appraiser gives Comparable B more weight because it needed one small adjustment while A needed two large ones, and reconciles the pair to an indicated Market Value of $588,000.

Common Mistakes and Exam Traps

• Adjusting the subject property is always wrong. Every adjustment goes on the comparable, and a distractor answer will quietly reverse this.
• Superior comparable means subtract, inferior comparable means add. Students reverse the signs under time pressure, so read which property has the feature before choosing a direction.
• The adjusted sale price is not the appraised value. The appraised value comes out of reconciliation, after every comparable has been adjusted.
• Reconciliation is not averaging. An appraiser weights the most similar comparable most heavily, so the answer usually is not the arithmetic mean of the adjusted prices.