Intelligence appraisal does not appear in a vacuum. The process follows the same sequence as does the traditional paradigm. The difference is in the tools, the technology, AI, and a sharpening of judgment in the underlying econometric theory. Intelligence Appraisal incorporates Evidence Based Valuation – EBV. Appraiser experience in legacy routine and thinking are the solid basis for today’s data-centric approach.
The “four sequence actions” comprise:
- Identify the problem
- Select right data
- Predict result
- Report
We look at each of these four parts in coming editions of “The Analogue Blog.” We start by looking at action 1 – identify the problem – as it incorporates the Scope of work. We can recognize that legacy standards comprise two parts:
- Integrity Standards, including the Ethics “Rule,” Record Keeping, Competency, and Scope.
- Performance Standards: Primarily Standard 1, on the development of real property appraisal.
We focus on how Scope of Work may differ when applying today’s appraisal science. In other words, we replace yesterday’s credibility standard with a measurable reliability standard.
We look at the parts of the traditional process which can and should apply in today’s appraisal science.
USPAP Standard 1 starts out with the requirement for the appraiser to identify the problem, and determine the scope of work necessary to solve the problem.
Rule 1-1(a) states the appraiser must “correctly employ those recognized methods and techniques.”
This is an immediate problem.
What is a “correct” method? And how does an appraiser determine whether a method is recognized? By whom?
There may even be an internal conflict in this standards rule, that requires recognition of the “principle of change” in real estate, construction, marketing, law, mortgaging, to compel “corresponding changes in appraisal theory and practice.”
How does an appraiser identify when change is sufficiently recognized to become correct and credible?
Evidence Based Valuation (EBV)© seems to resolve these difficult, almost philosophical issues (but which affect individual appraisers and their clients in a very hardnosed way).
As we might imagine, a user/reviewer who had not been educated in the newer objective algorithm – will judge it “not a recognized method.”
Darn.
EBV, based on data science, clarifies the line between objective data, objective algorithms, and logic – and the judgment required at certain points in the application of a model. Judgment decision points are marked and explained. (For example, the handling of a questionable “outlier” data point.) Good judgment comes from expert intelligence running artificial intelligence.
In other words, the algorithm (logic, math, certainty) is objective. Any lingering “subjective” judgment point is clearly set out, explained, and handled in one of four specific ways.
And that is the point.
Judgment is not a sweeping “worthy of belief” credible thing.
It is pointed out, identified, measured, and specified as to how it is handled. Pointed out, not subsumed.
It will be difficult to bring modern processes (analytics) to the act of valuation under the standards which were developed in a different day, one of subjective, sparse, secreted data.
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