Daubert: Relevant and Reliable?

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 and AMC employees.  (Who needs competency when you have a checklist!)

In addition to the Daubert case, the 1990 revision of Rule 702, (Federal Rules of Evidence), also provides guidance as to admissibility.  Note the parallel requirements:

  1. The testimony is based upon sufficient facts or data,
  2. The testimony is the product of reliable principles and methods, and
  3. The witness has applied the principles and methods reliably to the facts of the case.

Using  appraiserspeak:

  1. “get enough comps,”
  2. use dependable theory and procedures, and
  3. apply that theory and procedures to the comps relevant to the assignment.

The Court was adamant in saying that their decision was not to be used as a “checklist,” even as they provided some “points.”  The overall point is that the testimony must be grounded in the methods and procedures of science or “the scientific method.”  The factors listed as being pertinent comprise:

  • Have the theories and techniques been tested?
  • Have they been subject to peer review and publication?
  • Is there a known (non-statistical) error rate?
  • Are there governing standards?
  • Do they enjoy widespread acceptance?

The focus is on principles and methodology,” not the conclusions (opinions).

What tickles my throat – is simply this:

  1. Today’s electronic data and computation algorithms enable an objective, market-defined data set. This data set, (the complete directly-competitive market segment) is easy to obtain and define, and can be “scientifically” replicated.
  2. Our clients are asking us to show evidence of the comps we used (and why), and the comps we did not use (and why). The USPAP Scope of Work Rule requires us to identify “the type and extent of data researched.”  Standard 1 requires us to use “such comparable sales data as are available.”  Standards Rule 1-6 says:  “reconcile the quality and quantity of data available and analyzed…”  (emphases added).

Ah well. Too much. . . . “Trust me – I know a good comp when I see it.”