Is it time to recognize the importance of EDA in all valuation products? EDA is Exploratory Data Analysis, sometimes called PDA (Preliminary Data Analysis). Who does it? Is it necessary? And why do we care? EDA (Exploratory Data Analysis) is a key part of the modern, data science solution to value and risk. It’s an […]
What is “Appraisal modernization”? (This is part 5 in an ongoing series on Appraisal Modernization. Part 1 starts here.) The Federal Housing Finance Agency (FHFA) is seeking input to “create a more streamlined and accurate collateral valuation process.” It also wisely recognizes that new regulations “could have negative unintended consequences.” Said director Mark Calabria. While […]
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 […]
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. […]
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, […]
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 […]
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.’ […]
Misused terms: AI (Artificial Intelligence), ML (Machine Learning), makes you look smart. It makes for clever marketing. And it may be BS. The most important “algorithm” for valuers is A+B=C. Words are important. They help us understand each other and avoid wars. Marketers, in particular, tend to bandy about clever words, designed to impress you […]
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 […]
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: […]
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 […]
“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 […]
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. […]
The current residential form (the URAR) neighborhood section is well designed – for data the way it was 40 years ago, filled in on a typewriter, with no software ability to summarize, graph, or map data. Do We Need a Neighborhood Section? Part I is here. As complete market data was rarely available, (and difficult […]
This week’s blog, Is this a Time of Ripeness? is a guest post written by Steven Smith, MSREA, MAI, SRA, AG. See below for a more detailed bio. Appraisal sins are forgiven when the markets are strong, and prices are increasing at double digit rates as they have been. Once prices stop going up, deficiencies […]