What the adjustments in your appraisal actually mean

What is an adjustment?

An adjustment is a dollar amount the appraiser adds to or subtracts from a comparable sale to account for one way it differs from your home. The question behind it is simple: what would that sale have brought if it had been more like your house? Once every difference is handled, the adjusted price becomes one indication of your home's value.

Which direction do adjustments go?

Adjustments are always made to the comparable, never to your home. This is the part that trips up most readers. If a comparable has a pool and your home does not, the appraiser subtracts from the comparable, because that sale was helped by a feature you lack. If your home has the pool and the comparable does not, the appraiser adds to the comparable.

A short way to hold it in your head: comparable better, subtract. Comparable weaker, add.

Where does the dollar amount come from?

The amount is meant to reflect how the market reacts to a difference, not what the feature cost to build. Fannie Mae requires adjustments to be market based and asks the appraiser to explain the work and data behind them instead of leaning on a rule of thumb.

Appraisers reach those amounts in a few ways. One is paired sales, where two sales that are alike except for one feature are compared to see how their prices differ. Another is studying a larger group of sales to see how price moves with size, age or location. The report should say what was done, often in the addendum.

This is why an upgrade can earn a smaller adjustment than its invoice. A new kitchen may have cost a great deal, but the adjustment only reflects what buyers in your area pay for the difference.

What are the most common adjustments?

The most common adjustments follow the rows of the grid. You will see these again and again:

• Gross living area. Usually a rate per square foot, applied to the gap in finished space above grade.
• Condition and quality. Tied to the rating codes in the grid. A comparable in better condition gets a minus.
• Date of sale. Used when prices have been moving, so an older sale is brought in line with the effective date.
• Concessions. Used when a seller paid costs for the buyer that lifted the recorded price.
• Location, view and site. Used when a comparable backs onto a busy road, faces a park, or sits on a notably different lot.
• Garage, basement, bathrooms and extras. Each handled on its own row.

How many adjustments are too many?

There is no fixed number or percentage that makes a report wrong. Fannie Mae says it has no specific limits on net or gross adjustments. What matters is whether the final value is supported. Heavy adjustments can signal that a home is unusual for its neighborhood, and in that case the appraiser should explain the situation in writing.

How can you check an adjustment yourself?

You can check whether each adjustment points the right way and whether the same difference is treated the same way across comparables. If one comparable gets a garage adjustment and another with the same gap does not, that is a fair question to pass through the lender. For how the columns fit together, see how to read the comparables grid.