Judgment to analysis to science to econometrics?  When will this foolishness stop?

I liked appraisal the way it used to be.  It was slower, but more fun:

• Pick six or seven comps, go look, take pictures
• Pick three or four ‘good’ ones.
• Explain, justify, and support your opinions

Then data got easier – on line.  Then software got better – spreadsheets and canned forms software.  Then we didn’t even have to go to the post office.  It was heaven.  For a while, it was even more fun!

Then they started asking for ‘support’ for adjustments.  We took classes. They said there are a bunch of “techniques” for quantitative and qualitative analysis.  These included:

Quantitative – “using mathematical applications”

• Paired sales
• Grouped data analysis
• Secondary data analysis
• Statistical analysis (including “graphic” and “scenario”)
• Cost-related analysis
• Capitalization of income differences

Qualitative – “recognizes the inefficiencies of real estate markets”

• Trend analysis
• Ranking analysis
• Relative comparison analysis

The need for good judgment and great care is emphasized for these analysis techniques.

And what about science? – (Systematic study through observation and experiment.)  We study data to turn it into useful information to enable good decisions.  For us this is the study of data.  This is called data science.  Data science comprises three elements:

• complete data;
• computer power;
• competence in the field.

And what is competence in the field of asset assessment?  Is it an appraisal license, or even a professional designation?  This is the bristly part.  The legacy appraisal process tells us we use good judgment to come up with an opinion.  Judgment of what is the problem, what comps to pick, what ratios and adjustments to make.

Value is an economic concept.  Land and capital and finance and profit and government control – are all economic studies.  More specifically – econometrics is the measurement of economic relationships.  So, what is econo–metrics?

Econometrics combines three fields:

• economic theory
• mathematics
• probability

To meet today’s client needs – we need to become asset economists or asset analysts making decisions about the right models and algorithms to use. We can provide a number of products and services beyond and beside just a “point-value opinion.”  Field-related expertise is necessary.  Use of computers (analytics and visualization) is necessary.  A change in attitude is necessary.  Those willing to change and improve will prosper and gain respect.

The need for a point-value opinion two weeks ago is disappearing.  Data-stream analytics are all the rage.

What do you choose?