Once a valuation problem is “properly” identified — the next step is to determine the scope of work necessary… (Per USPAP – Uniform Standards of Professional Appraisal Practice).
Intelligence Appraisal, using AI, provides a more realistic objective/defined test – for both the problem identification and the scope of work. Intelligence appraisal incorporates appraisal science. So, it is less Pollyanna, more explicit, and builds the foundation for reproducibility.
Appraiser competence may affect the scope of work. Client requirements may affect the scope of work. And ongoing research and analysis may affect the scope of work. Development may even cause a client to revise the purpose of their need for property characterization and valuation.
So says the ‘development’ standard. It does not say “propose” a scope of work, nor does it say “anticipate,” “advise,” “hypothesize,” or “suggest” a scope of work. It says “determine.” Once so determined, the requirement is that it produce believable results. (Even if it is wrong.)
Problem identification and scope of work, as currently written, fully enables and supports modern methods – as embodied in Intelligence Appraisal (IA).
Intelligence Appraisal combines the best of now-available technology and theory. It combines:
- Applied artificial intelligence;
- Expert intelligence, and;
- Appraisal science.
We call this Evidence Based Valuation (EBV)©.
EBV reflects evidence, logic, and explicit, market-based, reasoning. The evidence-based analyst’s foundation is to identify the right relevant market segment, and not cherry-pick “supportive” comps.
The solution to the “problem” is complete market analysis, not finding and tweaking comps.
We find that the five dimensions of similarity, combined with the three predictive algorithms, simplifies the appraisal process, while exalting the knowledge and experience of the modern appraiser.
EBV steps:
- Download all potential useful sales.
- Reduce to the Competitive Market Segment (CMS)©
- Expand to an Optimal Data Frame (ODF) if there is sparse data.
- Apply predictive algorithms and adjustments as judgment (modeling) decisions.
- Conclude and reconcile using relevant graphs, descriptive statistics, and explicit explanations.
(We will expand and deepen the steps above in coming editions of this “Analogue Blog.”)
Note that the above steps require appraiser judgment, sharpened with the use of graphs and descriptive analysis. Disciplined use of AI fully integrates human intelligence and proven appraisal theory.
In the EBV learning, we objectively define through action-based instruction, using today’s technology.
Modernized standards must adapt to technology, not force square technology into oval standards.