Evidence Based Valuation Practice: Toward Real Price Indexing As a first, fully-explained example of the EBV approach, I want to look at one of the earliest but more important applications of our new way of thinking – price indexing. We can simplify things by looking at what we were taught, in order to discard some […]
Are You Worthy of Belief? Is your work “believable”? Standards require work to be “credible.” My curiosity got me this time. I researched “get people to believe you.” As you might guess, what I found is unsettling. First of all, one of the pieces of advice was to actually tell the truth! Imagine. Also, back […]
Appraisal Myths, Fallacies, and Foibles, #1 is the first in a series. Hype vs Reality: Adjustments and Comps – is the title of my talk on August 4th, 2017, for the Northern California Chapter of the Appraisal Institute. In preparing for this talk, it came to me that much of our discussions revolve around how […]
It depends on the client. Clients complain depending on the motive of the complainer! Let’s first look at just residential loan clients. (The other types of clients are for another time, another post.) So, what are the “types” of complainers in the residential loan world? Some categories: Form checkers “Administrative” reviewers Technical reviewers Middle management […]
We’re told to “support” our adjustments. We hear words like “prove” your adjustments. . . as if there were some magic formula which can give an exact, correct, and absolutely true number. It used to be so easy. . . Our trainer gave us a sheet with the “right” adjustments. Simple. USPAP Standards Rule 1-1 […]
We read articles and advertisements on how to prove an adjustment. Is this possible? How wonderful it would be. To prove an adjustment, just push a button and bam! Out comes the correct answer. How could we have we missed this? Of course, if such a simplistic and exact answer was possible – anyone could […]
Well, of course – appraisal is not based on our subjective beliefs. It is based on support! Support your opinions and conclusions! Support your results “by relevant evidence and logic.” Form your opinion, then support it . . . These words have always bothered me. A scientist does not form an opinion, then figure out […]
Make an adjustment. Support it. What does USPAP say? Nothing. It’s not in the integrity standards. It’s not in the performance standards. What does the AI Dictionary of Real Estate Appraisal say? It doesn’t define it. However, it does explain the result of adjustments: “Mathematical changes made to market data to facilitate comparison of understanding.” […]
KISS — Keep it Simpler Science! What?! How can that be?! Einstein said “Everything should be made as simple as possible, but not simpler.” The beauty of science is that it strives to make difficult things understandable. Traditional appraisal uses four or five comparable sales. The human brain can compare and understand up to six […]
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. […]
Ah, this is easy – pick comps! This was pretty easy, compared to the many other things I had to learn. It was a little harder than making adjustments though. For adjustments, I had an adjustment sheet. I foolishly asked how the numbers were arrived at. The answer was “It comes from many years of […]
You MUST make adjustments. Everybody knows that! Or not. In USPAP and The Appraisal of Real Estate (TARE) we have two predominant topical sources. The USPAP standards do not require adjustments. The word “comparable” is not defined, nor is the word “adjustment” found in USPAP. Nothing about adjustments nor picking comps. However, we note that […]
Assume what condition your assumption is in! Editor’s Note: This is Standards, part 3.13 of George Dell’s series on How Do I Move to EBV? Links to the earlier posts are here. Assumptions are a critical part of all analyses or reasoning logic. Assumptions about assumptions are interesting. Two starting points are assumed: 1) the […]
A dictionary definition of “adjust” is: “alter or move (something) slightly in order to achieve the desired fit, appearance, or result.” When I “carefully” pick some comps, I use my judgment to need as little fudging as possible. But it never seems to work out just right. There are three practices to adjust the fudging: […]
Time adjustments are not required. Unless they are needed . . . Appraisal time adjustments are also labeled as “market conditions” adjustments. Or, more recently in Evidence Based Valuation, “Market Price Indexing (MPI)©”. The FHFA blog post of 1/16/2024 defines “underappraisals” as those loan appraisals which come in below the contract price. The rising market […]