Market value for home loans in the United States is precisely defined. The understanding of “market value” is the single most important concept defining what appraisers do. Buyer/seller are prudent, knowledgeable, well informed or advised, and ‘typically’ motivated; there is no ‘undue’ stimulus; and the sale is in cash terms, with normal exposure, and “unaffected […]
USPAP (Uniform Standards of Professional Appraisal Practice) ethics rule specifically states that “An appraiser must not perform an assignment with bias.” It defines Bias as “a preference or inclination that precludes an appraiser’s impartiality, independence, or objectivity in an assignment.” As we noted in a prior Analogue Blog, there are two types of bias: personal […]
Could the very definition of market value hold bias? Let’s look. First, we need to figure out what types of bias there might be. There are two major categories: 1) analytical bias; and 2) human bias. And there may be some overlap! Analytical bias generally comes from two places: Error in data selection; Error in […]
Faster we understand! But what is “better”? Faster is one of the ways we can make more money. Faster can be personally satisfying — if I can deliver a good or better product by being more efficient. Efficiency comes through good systems, and personal competency. Aha! So better can involve better systems, and more knowledge. […]
Basic sequence of valuation is basic: identify problem, gather the “comparable” data, adjust, and report. Simple. Basic. The Market for Valuation Series, Part 1 How about AVMs? (Automated Valuation Models). The words are a bit different, but the process is the same: Enter the address, apply the data collect algorithm, apply the predictive algorithms, spit out […]
Postpone appraisal modernization. We can do that later. Why? Change and improvement should, normally, come from a profession. When a profession fails to bring improvement, eventually consumers/clients press for change. That’s what seems to have happened. The two largest consumers of appraisals now have pressed for change. Fannie Mae and Freddie Mac have realized the […]
Is there bias in the American Dream? Do we need a “loan conditions” adjustment? Read this series here. Loan conditions have nothing to do with ‘financing’ adjustments as we know them! One is local. The other is global. So how might loan conditions affect “market value”? Financing conditions are often related to motivation in sale […]
Legacy appraisal practice “the valuation process” is well established. Therein lies the problem. It is not designed to use modern methods toward objective, unbiased results. First, lets distinguish the different kinds of bias. We need to separate personal bias from analytic bias. Personal bias can be intentional, or unintentional (unconscious). Analytic bias itself can come […]
Appraisers have adjustments for “market conditions” and “sale conditions.” Why not “loan conditions?” There are similarities and differences. This is Part II in this series. Read Part I here Loan Conditions. Market conditions, for any particular market, price levels – trend together. So, appraisers apply ‘time’ adjustments to compensate for this change in ‘market conditions.’ […]
How about “loan conditions”? Clients only need a value in order to quantify risk. Is this scary? Editor’s Note: This post is an intersection of Modernization and Risk. There are only three uses for knowing value: 1) collateral loss, 2) investment gain, 3) equitability. Historical value may only be relevant to #3. Loss or gain […]
Is it possible discussions about bias are biased? Oh no! Surely personal motive cannot affect my position on bias. Can it? Editor’s Note: This is another intersection of Modernization (Part IX) and Bias (Part 6). It is difficult being a word nerd right now. Particularly writing about bias. This is a topic which is much […]
For modernization, we must note how coarse are the choices available to the loan originator: AVM, appraisal, hybrid, waiver, evaluation. Each choice involves different, but pre-set steps. There is little flexibility. It is not a continuum of analytical depth. To compare valuation systems to each other, we must look at the parts of the analysis, […]
The FHFA (Federal Housing Finance Agency) wants input on modernization in the world of housing finance. A big change. Human response to change is – resistance. A natural human first reaction is anger. Change is first seen as a threat. “Who are they to disturb my nice comfy world?” That threat of loss triggers us. […]
A great deal of economic, social, and political talk has been around affordability of housing. To explore this topic, it may be helpful to ask some questions. Good policy starts with the right questions. In simplest terms, some people have the resources to have nice homes in nice neighborhoods, others have just tolerable homes for […]
For some people, Evidence Based Valuation (EBV)© feels like a threat to “proven” appraisal practices. Others may believe it is a pressing, needed radical change. It is neither. Modernized appraisal unifies the best of established theory and modern methods. It is that simple. Traditional appraisal practice was built on sound fundamentals of economic theory. These […]
