A better ROV! Please reconsider the direction of your boat. Try this bigger oar. And use it only on the right side of the boat. Appraisers have long been asked to “reconsider” their opinion. Now we have a more official “standardized process” which affects appraisers, lenders, AMCs, GSEs, and of course, the borrower. This part […]
Will there be a need for traditional “appraisal” in 5 years? We think not. Some 25 years ago, I was education chair for my Appraisal Institute Chapter. Our ‘custom’ seminar considered the topic of technology replacing appraisers. The conclusion was, especially for residential appraisal, that AVMs would take a great market share. Worse yet, because […]
Biased thinking, biased analysis — a part of the appraisal process? The Appraisal Institute is starting to address some bias-related critical issues — head on. Cindy Chance, the CEO of the AI, in her recent posts noted the role of human bias as a natural phenomena of the survival of the species. She cited the […]
The second of our “foibles” in USPAP may be from that same paragraph on page (ii), noted last week. This paragraph effectively sets the mission statement for the Appraisal Foundation. The paragraph is titled: “ABOUT THE APPRAISAL FOUNDATION.” It states the AF provides “guidance on recognized valuation methods and techniques for all valuation professionals.” [Emphases […]
The USPAP (Appraisal Standards) publication starts with a self-telling paragraph titled: “ABOUT THE APPRAISAL FOUNDATION.” This paragraph presents the Appraisal Foundation’s self-claimed place as “the nation’s foremost authority on the valuation profession.” This “foremost” claim immediately places it in contention with other governmental and professional standards. The declared self-image conflicts with the reality. Alternative and […]
“A new valuation modeling paradigm” are the words used by the late Dr. Marv Wolverton. He is the author of the Appraisal Institute’s book on statistics for appraisers. He created the term in a response to my peer-reviewed Appraisal Journal article: “Common Statistical Errors and Mistakes: Valuation and Reliability.” The article itself can be summed […]
Appraiser education is about a proven and “well-established” process! Developed nearly 100 years ago! The idea is to balance demand on supply, then explain where the subject fits. 1930s: Find some comps, compare, conclude. 2000s: Pick some comps, adjust to fit, conclude. Yesterday: Pick good comps, adjust, adjust, conclude. The embedded old ways obstruct modern […]
Transaction costs are added to every property transaction. Is this add-on a fair addition to the fundamental, intrinsic value a buyer gets? Is it part of the value of the home? Or is it something else? Is this a public policy issue? Is it an appraisal issue? And, is it yet one more question about […]
Accuracy measures how close is a value to the true/actual value. Who cares? Accuracy is a professed desire of most users of valuation services. However, today’s conflicted regulations, legacy practices, and obsolete standards — do not have accuracy as a goal! The overarching goal of appraisal today is not “be accurate” — it is “be […]
“I never make adjustments,” said the MAI who first trained me. He was a top litigation appraiser. He explained that if he made an adjustment he had no way to explain how he got the number when cross-examined by the opposing attorney. Instead, he used what is called ‘qualitative analysis.’ The Appraisal of Real Estate […]
The word “modernization” has a meaning different from what I thought. It seems to depend on who is using the word. To me, it just meant “get with it!” To our GSEs (Fannie Mae and Freddie Mac), it means something special. The dictionary definitions and explanations focus on the social and even political aspects of […]
“Market” – A word poorly understood, and often misused. A gathering or place for buying and selling things. It can be physical, or virtual, and involves at least one third party for competition. Perfect competition is when you have many buyers and sellers. A real property market is seldom or never perfect. A “market” for […]
MPI© (Market Price Indexing) is a holistic approach to market analysis and “time adjustments.” Here we look at the process, the theory, the judgment, and the benefits of this model. MPI – The process involves simple mechanics: Download the relevant competitive market data. Create a scatterplot with sale prices over time. Clean the data of […]
Appraiser judgment is required. Analysis is reduction and logic. Analysis comprises reasoning and reducing the problem into well-mannered parts. Logic can be mathematical/absolute, or it may involve uncertainty/probabilistic reality. Reduction is the act of separating a larger problem into manageable parts. Judgment, in (traditional-legacy) appraisal, is emphasized in picking comps (data selection). Appraisers are admonished […]
Time adjustments are not required. Unless they are needed . . . Appraisal time adjustments are also labeled as “market conditions” adjustments. Or, more recently in Evidence Based Valuation, “Market Price Indexing (MPI)©”. The FHFA blog post of 1/16/2024 defines “underappraisals” as those loan appraisals which come in below the contract price. The rising market […]
