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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 overseers
  • Chief appraisers and upper management policy makers
  • Top level management and shareholders

Each of these has a different motive.  We may examine each in the future.  But for right now, let’s look at what we call legitimate complaints of a particular class of users:  Upper and top-level management and investors, and the competent and qualified technical appraisal reviewers.  These people want to make loans but are charged with keeping loss risk to a minimum.

It is important to remember that these people may have a very different motive from the form checkers, and administrative reviewers.  For our purposes, administrative reviewers do not have appraiser qualifications, while technical reviewers are appraisers, doing reviews under USPAP.

As you might guess, there are issues with general sloppiness and just plain errors.  But the gloomy, uneasy complaints are about two basic issues:  1) poor selection of comps; and, 2) lack of “support” for adjustments.  Let’s look at each of these two issues, and what might be solutions.

COMPARABLE SELECTION

We have been taught to select sales which are competitive, similar, and therefore comparable.  Unfortunately, those three words are used circularly to define each other. USPAP is of no help either.  Although the word “comparable” is used dozens/hundreds of times – it’s never defined.

No wonder we have problems.  This one word, this one concept – so central to the “process” of valuation – no one seems to know what one is!  (Except me:  You can trust me – I know a good comp when I see a good comp.)

The solution to this problem is contained in the principles of Evidence Based Valuation©.  EBV© follows basic principles of science, specifically data science.  We reduce the problem into its component parts.  Effectively we let the “data speak”.  We let the data itself tell us what is competitive.  We call this the CMS© (Competitive Market Segment©) Once this is accomplished, a whole world of reliable, measurable analytic tools opens up.  Most of these tools are about “adjustments”.

ADJUSTMENT ANALYSES

Once the right data set is delineated, things get easier.  In the Valuemetrics.Info education, specifically in Stats, Graphs, and Data Science we present these simple tools.  These are not scary.  They actually are just refinements on what has been taught in vague terms in the past.  The theory is basic.  You already know it.  EBV© actually makes things simpler and sensible.  With the right tools, the right thinking, and ethical intent – appraisal gets better, faster, and more gratifying.  As says Bruce Hahn: “EBV makes appraisal fun again!”