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 a way to look good. An economist does not form a conclusion, then gather data to “support” that opinion. An engineer does not decide on a type of bridge support system, then figure out what kind of soil and water-current conditions prevail. Your doctor does not decide to cut out your appendix, then look at the appendix to see if it was inflamed!
Form your conclusion, then figure out a way to sell it . . . Ughh!
The “Standard” is credibility. USPAP defines “credible” as “worthy of belief.” Belief. Be worthy.
The Oxford dictionary gives two main meanings:
- “An acceptance that something exists or is true, especially one without proof.”
- “Something one accepts as true or real; a firmly held opinion.” “A religious conviction.”
- “(belief in) Trust, faith, or confidence in (someone or something).”
The word “credible” is in USPAP some 130 times. Believe me – I counted . . . So, when you are doing appraisals, please, please, be believable. That’s the benchmark.
The word “credible” shows up in The Appraisal of Real Estate only 54 times, and “credibility” only 14 times. Gosh, it must be important.
So, it’s good to ask: How is our believability judged?
Well, there are certain scope of work “checklist” things, six of them, like users, use, value, date, subject, and conditions (assumptions). These lead up to what is an “acceptability” of the scope of work. These are, in short: 1) what your clients expect of you; and, 2) what does everyone else (your peers) do.
These are two tests of “credible assignment results.”
So, when an appraisal is judged by an appraisal reviewer – what is the reviewer supposed to do? You would think a reviewer would check on clients’ expectations and peers’ actions.
Nope. Only incidentally.
Standards Rule 3 asks (in addition to being “appropriate” and “credible”) specifically: “completeness, accuracy, adequacy, relevance and reasonableness.” So, we have a fully subjective, belief-based standard on which an appraisal is judged. So, the reviewer is to form an opinion of reasonableness, presumably against his/her own opinion of value. But must deny having that opinion (unless he/she then complies with Standards 1 ,5, 7, or 9) for concluding to “reasonableness.”
Oh yes, and be a believable reviewer. Because you too will be tested on your believability. And have you ever done a review of a review? Be believable in your judgment of the believability of the review of the believability of the original appraisal. Whew!
In future articles, we will consider the other four words: How does a reviewer test for completeness, accuracy (accuracy?), adequacy, and relevance. Looks like fun.
In future articles, we will consider a modern alternative: The art and science of Evidence Based Valuation©.
October 10, 2018 @ 5:19 am
Hello George, one of these days I will take your stats and graphs class. Course I have just have to finish this doggone SRA stuff first. George you and I have brains that are wired differently. You are a stats and Econ guy, I am just a beat up ol’ cowboy. I have beliefs each and every time I go out on an assignment. I am human, not an Econ guy (LOL). It is those beliefs that help me out as an appraiser. I have been doing this long enough that certain homes in certain market areas when I get an assignment I have beliefs of what I will see. When I get to the property if my expectations don’t match with what is there, either good or bad, that is when the process starts. I agree that we can’t or shouldn’t try to pound a round peg into a square hole and try to make it fit, but without our beliefs I am not sure we can do our jobs. We need to be able to take those beliefs and determine what is good, bad or indifferent with the property and the market, (here is where George runs in) then let the market tell us what those good, bad or indifferent items mean to the evaluation and eventually the valuation of the subject property. So if it is okay with you I will continue to believe in my beliefs and then adjust accordingly.
October 10, 2018 @ 8:01 am
Brad, you are exactly right. What is important is how we handle our prior beliefs!
October 16, 2018 @ 9:40 am
George- I sincerely applaud the underlying premise of your post that objective, scientific support is needed in appraisals. However, another interpretation of “Form your opinion, then support it” is one that recognizes the premise of the scientific method. Which frequently begins with the hypothesis, or a predicted outcome, followed by the systematic observation, measurement and testing. As always, though- your posts are thought provoking and interesting. Keep it up!
October 17, 2018 @ 7:09 pm
Thank you Bruce-
Yes, what you describe is something like what is called “abductive reasoning” as part of the scientific process. In the Valuemetrics workshops, we study the analysis of each of the three types of scientific reasoning (also deductive and inductive reasonin). Each has a proper place.
Abductive reasoning is where the asset analyst starts. Abductive reasoning is instinctive, educated guessing, and builds upon prior knowledge and previous studies.
The problem for us and the credibility of our profession – is the reliance on the prior information given us by the client — such as a “predicted outcome” of value. This is exacerbated by our federally mandated standards, which say a test of scope of work acceptability is “the expectations of parties who are regularly intended users.”
The concept of “form your opinion, then support it” is the curse of the scientific method. It is the curse of the reputation of the appraisal profession. It is the reason the profession is dying. So long as we premise “trust me, I know a good comp when I see it!” – we will continue to be less and less needed.
This foundation of our profession is crumbling to sand, turning to a sediment in the river of history.