Appraisers provide clients a point value.  From two weeks ago.  An opinion.

What clients need:  A forecast, a risk analysis, an underlying “fundamental” value; annual and spot update revaluations.

Why not?  Why not us?  Why not you?

What are competitors providing?

• AVMs provide testable reliability (risk) measures
• BPOs are faster and cheaper
• Economists provide analytic results, and the robe of academia
• MBAs are valuation analysts, never heard of “picking comps”
• Evaluators value, and avoid both USPAP integrity and performance standards
• AMCs push lender administration costs down to the appraiser and the borrower
• Internet consumer valuators are free

Each of these can provide a forecast and updates.  Only AVMs are commonly rated with an FSD (Forecast Standard Deviation).  As a result, AVMs are the strongest competitors to the traditional appraisal product.  So let’s look at what AVMs provide that opinion-sellers (appraisers) do not.

Because each AVM can be re-run on the same property at same date of value, an AVM gives the exact same result every time.  This is called “consistency.”  Appraisals are based on judgement data – the comps.  Each appraiser may or may not select the same comps.  No consistency.

We can delineate a CMS (Competitive Market Segment)^© but we cannot define what is a comp!  Interesting.  The Appraisal of Real Estate says a comparable is competitive to the subject.  It explains this by saying that a property is competitive if it is similar.  So far so good.  Then it says that a property is similar if it can be compared to the subject.  There we have it.  Clear as can be . . . a comparable is competitive is similar if it can be compared.  Oh yes, and expand your search if necessary.  Hmmm!

You may recall George Dell’s Impossibility Rule:  You can’t get objective output from subjective input!

Subjective is defined as “existing in the mind; belonging to the thinking subject rather than the object of thought” or “placing excessive emphasis on one’s own moods, attitudes, opinions, etc.; unduly egocentric”.

Objective is defined as “not influenced by personal feelings, interpretations, or prejudice; based on facts; unbiased” or “relating to something that can be known”

So how can appraisers provide something more than a subjective judgement-opinion of a point value from the recent past?  Actually, this is not hard.  In order to get objective analyzed results, you need to start with objectively classified data sets.

The difference for appraisers is like this: “I feel/believe this is a good comp”, vs. “The analysis/classification algorithm says this is competitive.”  Once the Complete Competitive Market Segment© is delineated, it becomes the data frame for further analysis.  The objectivity can flow through.  Logic and reason can follow on.  The result can be objective.

The qualified Asset Analyst^© can document a reproducible, objective, reliability-scored result.  The old-school appraiser provides a subjective point-value opinion.  Which is better?

Data science is the answer to big data.  Evidence Based Valuation^© is the answer to solving the needs of clients and the public trust.