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Biased Unbiasedness?
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 […]
Is Inferential Statistics Relevant?
Inferential statistics, at its core, is concerned with making inferences about a population based on a sample drawn from that population. It involves analyzing sample data to draw conclusions about the broader population because the broader population is either too large to analyze, unknown, or hypothetical. While invaluable in many scientific disciplines and research contexts, […]
USPAP Fallacies, Foibles, and Violations? Part 2
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 […]
USPAP Fallacies Foibles and Violations? Pt1
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 Appraisal Approach?
“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 […]
Education Stagnation Repudiation?
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 […]
Creepy Transaction Creep?
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 […]
What is Appraisal Accuracy?
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 […]
Are Adjustments Necessary? Part 3
“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 […]
What is Appraisal Modernization? Pt 13
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 […]
What is The Market?
“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 […]
Why MPI(c)?
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 […]
Judgment or Analysis?
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 […]
No Time Adjustments!?
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 […]
Are Standards Credible?
“USPAP” is for credible appraisers. The underlying principle of the actual ‘standards’ and the hundreds of pages of “explanatory” material is that the appraiser’s work must be “worthy of belief.” Accuracy and precision (trueness and sureness) are never stated as a goal. Believability, in turn, is judged by the user “expectations” and if “peers” would […]