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EBV measures markets, rather than compares comps.

In the traditional appraisal process, the appraiser ‘picks some comps’, then adjusts any differences in each comparable to the subject feature.

In EBV (Evidence Based Valuation©), the analyst identifies all the competitive sales, then applies predictive algorithms.

Which system is more USPAP compliant?  Which system is more accurate?  And which system takes best advantage of refined appraiser judgment?

Let’s take these three questions in order:

USPAP (Uniform Standards of Professional Appraisal Practice) is quite specific here.  Standards Rule 1-4 says the appraiser must use “all information necessary.”  For the sales comparison approach, rule 1-4(a) says “an appraiser must analyze such comparable sales data as are available.”  [Emphasis added].

The word “necessary” is not well defined, but means sufficient for “credible [believable] assignment results.”  This is quite subjective, but all we have to work with, a ‘judgment’ thing . . .

The word “available” is clearer.  It reflects historical reality – gathering four or five comps was the main objective and challenge of an appraiser.  Today, in most areas, all the data is readily available electronically in seconds.

For traditional appraisal, the traditional ‘opinion’:

  • Has a subjective goal – credible, or “worthy of belief”
  • Applies partial information (a few comps vs all available market data);
  • Is subjectively (reviewer’s opinion) reviewed;

It is a fundamental analytic logic principle that if the data selection is of partial data, and subjectively selected, is impossible to achieve an objective, reproducible result.  (Of course, believability, not reliability is the goal of the traditional appraisal process.)

For EBV©, applying UVS© (Universal Valuation Standard) concepts, the requirements comprise:

  • Data selection is determined by the market itself – the CMS© (Competitive Market Segment).
  • Judgement of similarity is sharpened through more rigorous analyses.
  • Effective reliability, not believability is the goal.

EBV© (Evidence Based Valuation) is the core of modern asset valuation and risk/reliability assessment. The analytic result is

  • Substantially objective, given the analytic results
  • Applies complete information (all relevant available data)
  • Can be objectively audited, reproducible, and reliability/risk scored.

EBV is available today, at Valuemetrics.Info, using open-source software, and “modernized” appraiser training.