Everyone knows what’s a market — (or do they)? Market Value is the ultimate goal of appraisals, of AVMs, of evaluations, of BPOs, hybrids, exceptions, and all forms of opinions (everyone has one). So, market value must be based on “the market”! To measure it, we must first know what it is. The dictionary has […]
“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 […]
The 1004MC form failed on every important principle of modern science of data analysis. Can we avoid yet another complex, ambiguous monster? What are the simple principles? Data science is new. It replaces much of the old “take a sample” statistics. And we learned this “inferential sample statistics” from professors who learned it in the […]
If you pick comps the old way, you may be violating USPAP every day! The old way of selecting data worked well for the old days. Gather seven or eight that look good, go look at them, make a couple of phone calls, and pick four or five for your report. That was the way […]
Appraisers have been taught to first analyze the subject property. Is this correct? What would an economist do? Would she analyze the property, or figure out the market? Well yes, an economist would try to figure out a market. First, it’s important to consider what type of market we are talking about. What are the […]
Stats can be troublesome. Knowing the why, the what, and the how of statistics can help rescue the appraisal profession. Continued misuse and misunderstanding will help bury it. Let’s look at these three questions. We look at misused words, statistics, and the opportunity. First: “The main problem with statistics is words.” Statistics is the study […]
Is valuation one analysis or two analyses? Traditionally, we have been taught to pick our comps carefully. A comparable is competitive to the subject. A competitive sale is similar to the subject. And a property is similar if it can be compared to the subject. Is that one analysis, or two analyses? From the 1930s […]
Our education tells us a comp is similar and competitive. So how do we measure “comparability”? If our job entails studying market data to get an answer … might it be important to know exactly how to describe a comp? In researching the literature, including journal articles, I find little help. Only two or three […]
Bruce Hahn, MAI, SRA, ASA is sitting in for me with this week’s post, “Data Science Makes Appraisal Fun Again”. Bruce is the owner of Landmark Valuation and a past president of the Northern California Chapter of the Appraisal Institute. Find him on Linkedin or at www.LandmarkValuation.com. Thank you, Bruce! 2018 marks the start of […]
In an earlier post we noted that the ideal comparable data set is the complete CMS, the Competitive Market Segment(c) , not just three comps. Some readers disagreed, believing that three comps is enough. A primary reason for the use of all sales which competed directly with the subject property is that it improves the […]
My friend, David Braun, points out in his book, The Valuation Analyst, that scope creep has turned into scope running. I’m sure many appraisers, particularly residential people will agree. He points out that as the reviewers ask for more, appraisers are finding ways to not be specific. This has turned into a self-perpetuating loop: “As […]
What is a predominant value? Is it the median, the mode, or the mean? Or could the predominant value possibly be the geometric mean or weighted mean? As it turns out, there are a couple dozen different ways to calculate a measure of center in data analytics. None of them are called ‘predominant’. Certainly our […]
Would today’s appraisal process pass the Daubert “checklist”? Daubert vs. Merrell Dow Pharmaceuticals (1993), a US Supreme Court case, basically says judges act as gatekeepers when it comes to allowing or disallowing expert testimony. Residential appraisers today face some of the issues, but with other types of “gatekeepers.” Our gatekeepers: underwriters, reviewers, opposing valuation experts […]