Are valuation procedures a set up for bias failure? Let’s look to see what systemic issues there may be regarding bias in valuation. This is an enigma of multiple overlapping issues. Let’s connect the “established” appraisal practice of USPAP (Uniform Standards of Professional Appraisal Practice), the established body of knowledge (EBOK), and human behavior reality. […]
Science is systematic way to build and organize knowledge. What’s to fear? Science is a search for the truth. Scary . . . How can the search for truth be scary? It is especially easy to deny the results of systematic study, if one can latch on to other’s fears, perpetuated misinformation, and wishful thinking. […]
Reform? What is the real problem? We know of meltdowns. We hear of bias. And we see the “American Dream” may be just a dream. So what about government? Why? And what part might appraisals play in these issues? More importantly, what keeps us from implementing solutions? Can government agencies (such as FFIEC and the […]
“Appraisal is market analysis!” is the title of a 1975 journal article by Richard Ratcliff, MAI. Freddie Mac Chief Appraiser Scott Reuter recently noted pervasive market analysis deficiencies in appraisal opinions. Specifically, discrepancies from actual contract prices. For appraisers, this disparity is easily accounted for by two reasons: Failure to implement time adjustments to the […]
Picking comparable sales is critical. Selecting the ‘best’ four or five ‘comps’ requires experience and training. Appraisal education tells us a good comparable is competitive, similar, and able to be compared. Customary training and practical experience generally focus on analysis and presentation of three to six comparables. Unfortunately, this is NOT what is required by […]
“Appraisal is not an exact science” are words I used to hear a lot. This understandable view leaves much to be explained. In the USA, appraisal is an opinion of value by an appraiser. (Licensed, and when required, for “federally related transactions”.) All other types of valuations have different or no regulations. However, they are […]
We have heard a lot about “modernizing” the appraisal process, particularly from the GSE’s (Fannie Mae and Freddie Mac). What is clear, is that the path is not clear. The GSEs, pressing for an improved valuation product, are in a difficult situation. On one hand, they are supposed to cooperate. On the other hand, they […]
Reviewers ask why a certain sale was not used as a comparable. Why don’t they know I already used the best comps, just like I was taught? Don’t they know I used what was competitive, similar, and “able to be compared” – Just like The Appraisal of Real Estate 15th ed. says: A good comparable […]
Appraisal standards and regulations are mostly designed to discourage personal bias. But what about traditional appraisal practice? To understand this question, we must separate personal bias from analytic bias. Personal bias can be open, declared prejudice – or it may grow from basic human instinct – towards those who look like us. This basic tribal […]
Once upon a time, appraisers did not give an opinion! They provided estimates. Why the change? It seemed appraisers were getting sued over their estimates of value, which opened the door to attack on how the analysis was done. An estimate comes from an analysis. The professional response: “We will just deliver an opinion!” Safe! […]
Time adjustments is a timely topic. Recent ski-jump rises in prices have been ramp-ant in many places. Valuemetrics.info provided a free, two-hour webinar on the topic, and we had almost exactly 1000 appraisers sign up. (Although many did not show – free, you know.) Prior to the webinar, I asked some reviewers about how appraisers […]
Data science is new ways of thinking, new tools, computation, and visualization. For valuation, it is simply optimizing the best of appraiser judgment and computer power. Traditional appraisal theory is good. It is a subset of economic theory. What is different is the available data and algorithms to select and predict from that data. Also […]
Statistics is a necessary part of modernized valuation, and it is very much misunderstood. The main problem with statistics is words! First, let’s get one word out of the way – A parameter is a summary number of any data set, such as mean, median, maximum, minimum, range, quantile, or variation (standard deviation). We use […]
Exploratory Data Analysis (EDA) is an implicit part of traditional appraisal. The appraiser invokes education, training, and market area familiarity to decide on comparables and adjustments to be made. The process takes place fully in the mind of a competent practitioner. EDA is expressed in quasi-governmental standards (USPAP) as a focus on the subject property’s: […]
I was curious about what is “critical race theory”. I didn’t understand what it was about. The Sunday paper article – yes, I still read the morning newspaper every morning . . . seemed to summarize CRT and the oblong political football it seems to have become. Why critical? Why Theory? And what does this […]
