Can you just give me some magical software which will calculate my adjustments?

I get asked questions like this often.  Can you just show me how to do a graph a client wants?  Can you just give me your class stuff so I don’t have to come all that way?  So often, the question degrades into something like “Why does the regression software give stupid answers?”  I pushed the magic button!

People do not like the answer.  You’re paid to do an analysis, not wave a magic wand, or push a magical appraisal button.  We have another name for that, it’s called an AVM.    In addition to a point value prediction, AVMs can be tested for reliability.  This is called the FSD (Forecast Standard Deviation).  The AVM.  It gets results.  It’s fast.  It’s cheap.  And it provides a measure of reliability – the FSD.

Why would a client want something slower and more expensive with no measure of reliability?  Why hire a pesky appraiser?  

Why?

Let’s look at possible reasons:

  • Make sure the property is still there, and like the owner described.
  • Check for other issues, like safety or other dangers.
  • Provide a more accurate (more true) objective prediction.
  • Provide some sense of reliability (more sure, credible).

A client needs to make a decision.  To make a loan.  To invest.  To support a legal position.  For tax reasons.  So what could an appraiser, an asset analyst do to help the client make a decision?  The point value is not enough. So what is needed? The client also needs to know how reliable is that result.  Can the client trust it?  Is there downside risk?

What service can appraisers provide clients in the future?  Clients need: 

  • Accuracy (trueness)
  • Precision (sureness)
  • Validity (appropriateness)
  • Reproducibility (replicable results, not subjective “believability”)
  • And more

Accuracy cannot be measured against a known value.  The answer is unknown.  Accuracy can only be evaluated by the relevance and appropriateness of the model.  Precision can only be estimated if the model is objectively based.  (The data must be objectively delineated.)  Validity is heavily influenced by the initial choice of model, the abductive reasoning required of a human investigator.  Finally, reproducibility must be based on objectively selected data.  And it cannot be based on the black-box analysis of an AVM. It cannot be based on the “trust me” opinion of anyone.

The essence of Evidence Based Valuation© is the rigorous selection of data.  Transparent analysis.  Leaving audit tracks.  The future of appraisal must depart from “trust my opinion.”  It must arrive at “see my data, see my work”.  Just like we learned in the third grade.