How appraisers determine adjustment amounts—and why they matter
Adjustments are central to how real estate appraisers determine a property’s final market value. But when are adjustments used, and how do appraisers calculate those dollar amounts? This article breaks down the purpose behind adjustments, common misconceptions, and the various methods appraisers use to support them.
One of the most persistent myths is that there are set dollar amounts for specific amenities—like a “standard” adjustment for a pool or an extra bedroom. Years ago, generic adjustment lists circulated among Realtors as rough guidelines. They were never meant to be used as fixed rules, yet many came to rely on them as the final word.
If you still have one of those old lists, it’s time to toss it.
The truth is that adjustments are always market-specific and property-specific. There is no universal list.
Adjustments serve one purpose:
Appraisers adjust the comparable sales—not the subject. Once all differences are accounted for, appraisers reconcile the adjusted sales prices to determine the subject’s market value. This Sales Comparison Approach is typically the most heavily weighted method in residential appraisals.
Common categories requiring adjustments include:
Property rights conveyed
Financing terms
Conditions of sale (arms-length vs distressed)
Market conditions
Location differences
Physical characteristics of land and improvements
Depreciation
Zoning, water rights, environmental concerns, and flood hazards
Any factor that measurably affects market value
A simple way to understand adjustment direction is:
CBS – Comparable Better ? Subtract
CIA – Comparable Inferior ? Add
If a comparable is superior to the subject, a negative adjustment is made. If a comparable is inferior, a positive adjustment is made.
Example: If a comp is larger than the subject, its price is adjusted downward to reflect that the subject has less square footage.
Most appraisal software handles some items automatically, but not all—so checking adjustment direction is crucial. A misplaced minus sign can significantly skew a value.
Appraisers use several analytical tools to determine what each difference is actually worth in the local market. Below are the primary and supplemental methods.
This method compares two nearly identical sales that differ by only one feature (e.g., one has a fireplace, the other doesn’t). The price difference between the two helps isolate the value of that amenity.
This works best in uniform neighborhoods; in diverse markets, isolating each feature is more complex.
After establishing site (land) value—which should always be the first step—appraisers determine what percentage of total property value is attributable to the land. This helps support adjustments for lot size, site desirability, and location influences.
The cost to replace the improvements, plus site value, minus depreciation, provides useful information for certain adjustments.
For example, condition adjustments can be tied to differences in effective age. Appraisers can compare the improvement value against remaining economic life to extract a supportable condition adjustment.
A common misconception is that square footage adjustments come from price-per-square-foot calculations. They do not.
Price per square foot includes everything—land, upgrades, condition, pools, garages, quality, etc. The adjustment for square footage reflects only the market’s reaction to additional living area, not the entire property bundle.
Regression is a statistical tool that examines the relationship between features (like GLA, age, baths) and sale prices. With proper data input, it can support adjustments for many amenities.
But accuracy is critical—garbage in, garbage out applies here more than anywhere.
Beyond the traditional techniques, appraisers incorporate a variety of supplemental tools—especially for complex or unique properties.
This method tests how small incremental changes in an adjustment (such as $1,000 or $2,500) affect the final reconciled value. It helps refine adjustments when market data is limited or wide-ranging.
Appraisers often gather insight from:
Realtors
Builders
Property managers
Buyers and sellers
These interviews help reveal what the market truly values—such as premium views, upgraded kitchens, private docks, or better lot orientation. Market interviews do not replace data, but they support and validate it.
When closed sales don’t provide clarity, appraisers study:
Active listings
Pending contracts
Withdrawn or expired listings
Price reductions
This information shows how buyers are currently reacting to different features and can support adjustments for condition, upgrades, or location.
For new construction or unique custom homes, appraisers may consult:
Local builder cost sheets
Contractor quotes
RSMeans data
Material/labor cost estimates
This helps support adjustments for items like finished basements, outdoor living areas, garages, or specialized upgrades.
For properties with income-producing components (ADUs, rentable docks, basement apartments, duplex features), appraisers can derive adjustments from:
Rent differences
Vacancy rates
Operating costs
These income differences can directly affect value.
This method distinguishes between cost and value contribution. A $100,000 upgrade rarely adds $100,000 in market value.
By analyzing sales patterns, appraisers determine what the market is actually willing to pay for a specific feature.
Some appraisers use internal scoring systems to compare:
Quality
Condition
View
Location
Desirability
By applying consistent scoring across multiple comps, appraisers can extract more reliable adjustments.
Appraisers look at how quickly similar homes sell relative to their features. If homes with lake views, renovated kitchens, or larger garages consistently sell:
Faster, and
For higher prices
then those features deserve measurable adjustments.
Bracketing ensures that comps collectively:
Surround the subject in quality
Surround it in size
Surround it in condition and amenities
If the subject’s final value logically falls between superior and inferior comps, it validates the adjustments and the reconciliation.
In the end, most adjustments come from a combination of:
Market data
Cost indicators
Matched pairs
Regression
Experience supported by evidence
Appraisers weigh these tools together and select adjustment amounts that are best supported by the local market.
Adjustments are not fixed numbers—they are market-derived, evidence-based, and specific to each assignment. The goal is always the same: to make comparable sales truly comparable, so the final value conclusion is as accurate and credible as possible.
We asked AI directly the following: Will AI replace Appraisers? Below is the reply which we agree with completely. Pendley & Pendley Appraisers conducts many complex real estate appraisals including Lake Lanier and Commercial property appraisals. Therefore, now more then ever, you need that type of expertise from an actual Appraiser, not AI. ___________________________________________________________________ Artificial intelligence (AI) is reshaping nearly every industry — and real estate appraisal is no exception. With tools like automated valuation models (AVMs) and machine learning on the rise, many people wonder: Will AI replace real estate appraisers?
The answer: No. AI will enhance the profession, not eliminate it.
AI can process enormous amounts of data, but it lacks one thing: human judgment.
Appraisers bring local market knowledge, experience, and an understanding of property nuances that technology simply cannot replicate. An algorithm doesn’t know if a home has an obstructed lake view, outdated improvements, or superior craftsmanship — all key factors that influence value.
For areas like Lake Lanier, Hall County, and surrounding North Georgia markets, appraisers’ local insight is crucial. No two waterfront or commercial properties are exactly alike, and those differences can make or break a valuation.
Additionally, federal and state regulations require licensed or certified appraisers for most mortgage-related valuations. Even with new desktop and hybrid formats, a qualified professional must analyze and certify the final opinion of value.
And when valuations are disputed — such as in lending reviews, estates, or litigation — AI can’t testify in court. Only a trained, credentialed human can stand behind their opinion of value.
AI isn’t replacing Appraisers — it’s empowering them. Here’s how:
Data analysis: AI quickly identifies comparable sales, trends, and outliers.
Report writing: Drafting tools streamline narrative sections and reduce errors.
Quality control: Lenders and AMCs use AI to review reports for consistency and risk.
Hybrid appraisals: Field data collected by others can be analyzed more efficiently by appraisers using AI-assisted tools.
By automating repetitive tasks, AI allows appraisers to focus on interpretation, market insight, and professional judgment — the elements that make a valuation credible.
AI will continue to reshape how appraisers work, but it cannot replace the expertise, accountability, and integrity of a trained Appraiser.
Technology can measure and predict, but it can’t understand a neighborhood, recognize subtle property features, or apply ethical reasoning.
The appraisers who thrive in the coming years will be those who embrace AI as a partner, using it to enhance accuracy, efficiency, and credibility — not as a substitute for professional experience.
ROVs—short for Reconsideration of Value—have been around for years. They come into play when a borrower, lender, or Realtor feels that an appraisal value is too low (you’ll notice no one complains when the value is too high!). In that case, they can submit an ROV and provide additional sales for the appraiser to review and consider.
Here’s the issue: you now have non-Appraisers telling the Appraiser which sales to consider instead of the ones already researched and selected in the report. What many don’t realize is that appraisers review many potential sales before narrowing them down to those most representative of the subject property’s market value.
The ROV process often feels like the tail wagging the dog:
“I don’t like your value, so here are some other sales I think you should use to raise it.”
As of the updated guidelines, here’s what you need to know:
Lender Review First Before an ROV is sent to the Appraiser, the lender must review it. They need to determine whether the new sales provided could actually make a difference in the value. Even more importantly, the ROV must explain why the new sales are better than the ones the appraiser originally used, and specifically what is flawed or non-comparable in the original report.
Limit of Five Sales An ROV can only include up to five additional sales for review.
Only One ROV Allowed Each appraisal report may only be reconsidered once.
If you plan to submit an ROV, make sure it’s backed by valid support. Simply sending in sales with higher prices in hopes of pushing the value up won’t work.
Lenders must provide borrowers with the ROV form and option both before and after the appraisal. Unfortunately, this will likely slow down the process, creating delays for all parties involved.
It’s also important to note: Appraisers cannot charge extra for reviewing ROVs, even though these reviews take additional time. That makes it even more critical for lenders and borrowers to follow the rules and only submit ROVs when there is a clear and valid reason to challenge the original appraisal.
A major transformation is coming to the appraisal world starting January 2026. A brand-new appraisal form—known as URAR/UAD 3.6—will be required for all loans backed by the GSEs (Government-Sponsored Enterprises). Other government programs such as HUD, VA, and USDA are also expected to adopt these new form requirements. Broad production of the form begins in January 2026, full mandatory use is scheduled for November 2026.
The biggest change is that one universal form will now be used for all 1–4 unit residential properties, streamlining the appraisal process. It will not apply to land-only or commercial properties, which already use different forms.
Once the Appraiser begins completing the form, it will dynamically adjust to fit the specific property type. This flexibility is designed to improve reporting consistency across all property types.
There will definitely be a learning curve for all parties involved. This new form includes more detailed data points, which means the appraiser must gather more comprehensive information about the home and its key systems.
Here’s how you can help streamline the process:
Provide the year and estimated cost of upgrades, renovations, and additions
Share a plat map of the property, if available
Give details about major systems: HVAC, plumbing, electrical, etc.
The new form requires Appraisers to objectively assess the condition and quality of a home’s components using predefined rating scales. This reduces subjective commentary and ensures more standardized, data-driven reporting. For example, rather than describing the remaining economic life of a system in a narrative, the appraiser will select from predefined options.
Appraisers will now need to complete much of the form on-site using mobile devices, including creating digital sketches of the property. While not officially mandated, mobile data collection will become a practical necessity to meet the new standards efficiently.
This transition will be especially challenging for veteran Appraisers who are accustomed to traditional reporting methods. Sketching large or complex homes on-site using a mobile device can be time-consuming and error-prone. Items missed during the inspection may require a return visit, which is inefficient and frustrating.
Many long-time Appraisers are choosing to step away from lender work due to these changes. As a result, more experienced Appraisers may be replaced by less seasoned professionals. While fresh perspectives are welcome, the loss of deep industry experience can impact the accuracy and credibility of valuations.
This new form will require additional time for completion, more explanation to clients, and carries greater liability for the Appraiser. As a result, higher fees for appraisal services should be expected.
Be aware that this change has been years in the making—and it’s coming soon. If you're involved in real estate transactions, it’s essential to work with an Appraiser who:
Understands the new URAR/UAD 3.6 requirements
Is comfortable using mobile technology in the field
Has the experience and insight to navigate complex properties confidently
At Pendley & Pendley Appraisers, we are fully prepared for the transition to URAR/UAD 3.6. Our team combines decades of experience with the latest mobile data collection tools to produce accurate, credible, and compliant appraisal reports. We are committed to staying ahead of industry changes—so you can move forward with confidence.
Whether you're a homeowner preparing for a refinance or a Realtor working with a client, real estate appraisals can seem like a mystery. Below are the 10 most common questions appraisers get asked—along with honest, straightforward answers to help you navigate the process with confidence.
No. The appraisal report is confidential and intended solely for the client—typically the lender or the person who ordered the report. It is not shared with the county tax office or any outside parties unless the client provides explicit permission.
Not directly. While we analyze price per square foot for both the subject property and comparable sales, it’s not the driving factor in valuation. Price per square foot includes much more than just the home’s size—it reflects lot value, pools, accessory units, basements, and other features.
In neighborhoods with diverse property types—like lakefront homes or homes on large acreage—price per square foot can be highly misleading. It’s only more relevant in cookie-cutter subdivisions where homes are nearly identical.
The key factors include:
Square footage
Quality of construction
Condition of the home
Site/lot value
And of course, location
Upgrades and updates can significantly boost value—as long as you don’t over-improve beyond what’s typical for the neighborhood.
Appraisers follow the principle of substitution—we ask: What would a buyer choose instead if this home weren’t available?
We review recent sales in the same or similar neighborhoods and make adjustments for differences. Ideal comps are those needing the fewest adjustments. We also “bracket” the subject’s features by choosing both superior and inferior properties in terms of price, size, condition, etc.
Yes—most of the time. However, how much value depends on the market. We compare similar homes with and without pools to determine what buyers are willing to pay for that feature.
A pool in disrepair may detract from value as it must be repaired. One that far exceeds others in the neighborhood may not get the value expected. Keep in mind, cost does not always equal value—a $100K pool doesn’t automatically increase the appraisal by $100K.
Absolutely not! An appraisal determines market value, while a home inspection evaluates the physical condition of the property’s systems (plumbing, electrical, HVAC, roof, etc.).
Appraisers assume systems are operational unless there's visible evidence to the contrary. For peace of mind, always get a home inspection in addition to an appraisal.
No. The methodology is the same regardless of purpose—whether it’s for a refinance, sale, divorce, or estate planning.
The only exception might be if we're specifically asked to determine a quick-sale or liquidation value, which is often lower due to shorter marketing time.
Yes, but with a caveat. Basement space—if any part of it is below grade (which is common)—is not included in the main Gross Living Area (GLA). Instead, it’s valued separately, usually at a lower rate, based on what the market typically pays for finished basements in your area.
Yes—with some guidelines. We welcome input, but please don’t follow the appraiser throughout the home. It can be distracting and may cause us to miss important details.
Instead:
Be available to answer questions after the walkthrough
Provide a “brag sheet” with upgrades, remodel dates, and costs
Realtors can share comparables—but remember, not all will be used unless they align with true market data
Not necessarily. Appraisers don’t "rubber-stamp" the contract price. The value must be supported by market data, not emotion or competition.
For example, during the post-pandemic housing frenzy, many buyers paid over market value due to bidding wars. On the flip side, some homes are underpriced intentionally.
The Appraiser’s job is to provide an independent, well-supported market value—even if it differs from the agreed-upon price.
Appraisers play a critical role in the real estate process, providing an unbiased, data-driven opinion of value. Understanding our approach—and why we do what we do helps make the process smoother and more transparent for everyone involved. Please contact us if you have more questions and for all your Appraisal needs. We are always here to help you.
Landmark Legal Victory for the Appraisal Profession: Judge Dismisses Bias Lawsuit
The Appraisal industry has scored a significant legal victory in a recent court case involving allegations of bias. A judge has officially dismissed a lawsuit filed by a homeowner who claimed racial bias influenced the appraised value of their property. You can view the full case details and the judge’s ruling [Link to Case].
While the dismissal is a step forward for the profession, the damage to the individual Appraiser’s reputation has already been done. However, this ruling sets a powerful legal precedent that protects appraisers from unfounded accusations when a homeowner simply disagrees with the valuation. The Appraiser involved now has the right to countersue for defamation—whether he chooses to do so remains to be seen.
For years, the appraisal profession has been under fire with allegations of bias and racism. While there have been settlements without admissions of guilt, no lawsuit has successfully proven that racial bias influenced an appraised value.
It's important to understand one crucial point: Appraisers have no motive to apply bias—it is both unethical and illegal. Unlike others in a real estate transaction, Appraisers do not benefit financially from the outcome of a sale or the closing of a loan. Our sole responsibility is to deliver an objective, well-supported valuation. We serve as gatekeepers for lenders, ensuring that loans are backed by adequate collateral. For private clients, we help protect against overpaying for a property.
No Appraiser is willing to risk their license—or their career—by engaging in bias. The appraisal fee is simply not worth that risk.
We hope this landmark ruling will encourage homeowners to pause before filing lawsuits based on dissatisfaction alone. With this precedent in place, we anticipate a decline in frivolous claims and a renewed respect for the integrity of professional Appraisers.
How the Trump Administration May Impact the Real Estate Appraisal Profession
With President Trump’s first 100 days back in office behind us, it's a good time to take stock of how current federal policy changes are shaping the real estate appraisal industry.
This is not a political post. This is a factual update that may affect buyers, sellers, Realtors®, and appraisers alike.
Appraisers are under increased scrutiny. In the past 5 years, allegations of bias in the valuation of minority-owned homes have become a major national focus. No proven cases of appraiser racism in court.
Despite several lawsuits, not one case has resulted in a legal finding of appraiser misconduct related to bias. WE EXPECT LAWSUITS TO DECLINE MOVING FORWARD. SOME APPRAISERS ARE ALSO FILING COUNTERSUITS FOR DEFAMATION.
Federal rollback of bias initiatives. The Trump administration has:
Disbanded the PAVE Task Force
Rescinded HUD appraisal bias protections
Issued executive orders rolling back DEI programs across agencies
Yes, some minority neighborhoods are valued lower—but this is based on market demand, not appraiser prejudice.
Property values are shaped by:
School quality
Crime statistics
Proximity to jobs and amenities
Property condition and location
Appraisers don’t set values—we reflect the market. We are independent, neutral parties with no stake in the transaction.
As federal priorities shift, it’s more important than ever to educate the public on how valuation works and protect the integrity of the profession.