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  #11  
Old 03-10-2013, 10:14 AM
Marion Rhodes's Avatar
Marion Rhodes Marion Rhodes is online now
 
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I do review work sometimes.

I could careless what the OMV was or even what my OMV is. 9 out of 10 times my OMV is within 5% of the OA. I don't even care if the OA used the "best comps". I do my own appraisal and I reconcile the two. The choice of which comps to use or not use, was again, their opinion. If their comps were appropriate, did those comps support the OMV? That's the only question I ever deal with concerning comps in a review. Just two considerations, appropriate and support. If I choose different comps but my results are similar to the OA, then that's just additional support for the OA that they did their job and their opinion is/was supported in the market place. And I don't care what they used for adjustments. If they used $25 a square foot and I used $20, it matters not as most markets will support size adjustments between 0 and $50 a square foot here. So there is usually enough market data to "support" an adjustment. The question really is, did the adjustment minimize the economic difference for the size difference? Because some appraisers lose track of WHY we make adjustments and start out with comps that have sale prices 5% apart and wind up with adjusted sale prices that are 20% apart. You know the guys, here is a difference, make an adjustment mentality.

But if my opinion is vastly different then the OA, now we have a problem. Either I missed something in the description of the subject property, or the OA did not use appropriate comps. So if they did not detail why they chose the comps they did, I have to try and figure it out. This is where my opinion counts. Either they used all far superior comps or comps from different neighborhoods, or far inferior comps without explanations. I'm always amused that when beating down a value, appraisers never leave a neighborhood for comps, but when pushing up a value, almost 100% of the time they use comps from outside of the neighborhood. Except for just one guy who used all lakefront sales in a PUD for a home not on the lake, and did not mention the lakefront locations of the comps.

But then again. I've seen reviews that were worse than the original appraisals. Reviews should be their own specialty, and mandatory training should be required. There is nothing more disheartening than to know that some appraisers are running their behinds off trying to stay afloat and some AMC is going to have their report reviewed after shopping for the cheapest reviewer they can find. As an industry, our certs and our clients hang in the balance, pending a review. As an industry we should be demanding more, and better safe guards as to who is competent to review and who should not be allowed to review until competency is proven.


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  #12  
Old 03-10-2013, 10:27 AM
J Grant's Avatar
J Grant J Grant is offline
 
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What some call bias, others might call experience.

There is likely some "anchor bias" on most assignments. A sales contract is an obvious one. If an appraiser did a report in area three weeks ago, the prior report conclusions can be a bias. It's not a rocket science to assume a higher value is more desireable for a refi assignment, which can present a bia in value direction.

One of the challenges of appraising is retaining the experience from former assignments or knowedge of client expectations, and then be able to go on and develop the report with an unbiased analysis of the data and market conditions.
A review appraiser knowing what happened in the housing collapse brings the experience of hindsight, along with possible bias to the assignment. A good reviewer can set aside the bias while retaining the value of experience.

Wolud a review appriaiser who was in a time warp, let's say in a submarine for five years and missed the market collapse, come to the same conclusions when retro reviewing a report as an appraiser aware of the collapse?

If well trained and competent, the results of both reviewers should be equivlalent because again, hindsight does not change what was included, or excluded, on an original report and does not change the data that was present at the time.

Last edited by J Grant : 03-10-2013 at 10:33 AM.
  #13  
Old 03-10-2013, 10:40 AM
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George Hatch George Hatch is offline
 
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I don't know why anyone assumes reviewers primarily work off the value conclusion. Can you imagine how much wasted time is involved with that? It means they have to decide before they even read the report whether they agree and then when they don't they have to look for reasons why and even invent reasons why in order to support their anchor bias.

You guys know that lenders don't particularly like it when a reviewer finds enough fault with an appraisal to trigger a rejection, right? It means they either have to go to the additional time and expense of repairing or replacing the appraisal or they have to let a business opportunity walk. Reviewers don't generally get a pat on the back for making the process drag on over stupid stuff. And reviewers running into poor appraisals doesn't do much for the lenders' opinions of the appraisal process or appraisers in general, either.

I think the chasing trivia game all goes back to whether someone uses the benchmark of accurate or reasonable. If you start off looking for reasonable then there's no need for the Vulcan Mind Meld in the first place. You don't expect the value conclusion to match your own opinion down to the penny so you don't have to assume the role of the enforcer to make that happen.

I don't have the time or inclination to waste it in order to manufacture pssing contests I can't win. My anchor bias is that appraisals are generally reasonable unless proven otherwise, even if they do include some minor housekeeping errors or other trivia.

Because it's impossible to get away with criticizing an opinion the way to pursue unreasonable is to identify the errors in fact being used to support those opinions. With poultry houses or other special use properties that may require the use of specific atypical methodology there might be some disagreement about methodology.

But apart from that you basically can't get to an unreasonable result unless you're making significant errors with the facts - whether those facts pertain to the description of the subject, the comps or whether they really are the most similar.

So that's what I look for - I go through the report by checking the subject's description so as to understand the nature of the appraisal problem then I check to see if the comps are accurately described and if they're really among the best comps. If they are then I don't worry about adjustments or where in the range the value conclusion hits because I know it can't be too far off. Not enough to be unreasonable and certainly not enough to affect my client's interests. And therefore not enough to argue over.

I don't say anything in a review that I can't reasonably back up. That's why I never start fights I can't finish and why I never lose on appeal. I can lift my leg on an appraisal report and show that I'm paying attention in other ways besides starting unproductive fights. That often amounts to adding more content in support of the report so as to add to the users' confidence in that report.

With that said, I can see how a reviewer who is working an impossible volume is going to be compelled to cut corners, particularly with explaining what they're doing. But that's primarily a function of what their employers expect from them. The FormMonkey mentality isn't just limited to appraisers.
  #14  
Old 03-10-2013, 12:24 PM
Terrel L. Shields's Avatar
Terrel L. Shields Terrel L. Shields is online now
 
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Quote:
there is a way to avoid "anchor bias",
First is to recognize you have it
Quote:
I don't see the affect of 'anchor bias'
If you cannot see the affect, then you cannot avoid the bias. period. That's what the psycholgists say and you only "think" you are being unbaised.
JG - I've appraised over 20 years. I have easily done 5000 residential appraisals. I don't do many now, none on forms for several years, but I didn't get stupid just because I don't do fannie mae & FHA work anymore.

Let's have a show of hands. Is the "average" review going to indicate a higher or a lower value? And if you think (know?) as JG says...
Quote:
the OA reports flagged for a field review tend to be reports with issues
which means you've already subconsciously assumed the report has "issues". The problem with hindsight and anchor bias is you cannot escape them and in thinking you are, you continue to skew the results in the same direction.
Quote:
There would inevitably be a minority of reviewers who have this extreme mindset,
dream on. It is epidemic. Obviously if we are reviewed and it is "good" we likely won't hear anything back. I certainly do not have any quarrel with an administrative review that checks for math errors, missing information, what have you. I have little to quarrel about someone questioning an unexplained adjustment or such. I do have an issue when someone is vetting you over something that is time tested. I do have issues with appraisers who review that almost invariably change something. I have the same angst with folks like one appraiser who commented to me, "Well XXX doesn't pay me enough to justify the extra work required to put in new comps...." .

Further, I got a call last week from someone asking me if they thought they should go into review work because they were so slow...???...That worries me. If it is only the slowest appraisers who do reviews...then that implies the best appraisers are not doing reviews. And from the residential review appraisals I see around here, there are a lot of them with less than 5 yr experience and very high license numbers. Canada requires minimums that ought to be incorporated into our laws. No appraiser with less than 5 yr. experience should be allowed to review. And no appraiser should be allowed to review without taking a minimum of 30 hr. of QE on reviews. That's like sending an appraiser out to value a ranch and them never having an Ag related appraisal course.

I got a PM about a report where the reviewer beaned the OA over a difference in value opinion of $2000 (on a $200,000 property) and also claimed that "commercial" consisted of 4%, not 5% of the neighborhood. And an issue bought up then revolved around the circle of reviewers who get reviewed and are asked to respond. They then know who zinged them. Guess who gets zinged at the next opportunity? We have appraisers who despise each other over what the other thinks (and well may be right) was a bum review.

A few years ago, our state board had to put out a newsletter requrest for reviewers who turned in someone for a bad appraisal to at least read Std 3 and be prepared to defend their reports because they were going to ask for them too. While many complaints were legitimate, the reviews sent in by the state were equally flawed ending up with both the OA and the RA getting sanctioned.

There is a simple experiment that would tell us a lot. Not that anyone would ever run it.

Pick a series of properties .
Send out 2 competent appraisers of equal experience neither knowing another appraiser is working on this. Review all the appraisals by one using randomly selected reviewers. Measure the deviation in conclusions between the 2 appraisers and the reviewers and OA...I'm betting there is statistical evidence of bias by the reviewers.
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  #15  
Old 03-10-2013, 02:02 PM
George Hatch's Avatar
George Hatch George Hatch is offline
 
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Quote:
Originally Posted by Terrel L. Shields View Post
First is to recognize you have itIf you cannot see the affect, then you cannot avoid the bias. period. That's what the psycholgists say and you only "think" you are being unbaised.
JG - I've appraised over 20 years. I have easily done 5000 residential appraisals. I don't do many now, none on forms for several years, but I didn't get stupid just because I don't do fannie mae & FHA work anymore.

Let's have a show of hands. Is the "average" review going to indicate a higher or a lower value? And if you think (know?) as JG says...
which means you've already subconsciously assumed the report has "issues". The problem with hindsight and anchor bias is you cannot escape them and in thinking you are, you continue to skew the results in the same direction.dream on. It is epidemic. Obviously if we are reviewed and it is "good" we likely won't hear anything back. I certainly do not have any quarrel with an administrative review that checks for math errors, missing information, what have you. I have little to quarrel about someone questioning an unexplained adjustment or such. I do have an issue when someone is vetting you over something that is time tested. I do have issues with appraisers who review that almost invariably change something. I have the same angst with folks like one appraiser who commented to me, "Well XXX doesn't pay me enough to justify the extra work required to put in new comps...." .

Further, I got a call last week from someone asking me if they thought they should go into review work because they were so slow...???...That worries me. If it is only the slowest appraisers who do reviews...then that implies the best appraisers are not doing reviews. And from the residential review appraisals I see around here, there are a lot of them with less than 5 yr experience and very high license numbers. Canada requires minimums that ought to be incorporated into our laws. No appraiser with less than 5 yr. experience should be allowed to review. And no appraiser should be allowed to review without taking a minimum of 30 hr. of QE on reviews. That's like sending an appraiser out to value a ranch and them never having an Ag related appraisal course.

I got a PM about a report where the reviewer beaned the OA over a difference in value opinion of $2000 (on a $200,000 property) and also claimed that "commercial" consisted of 4%, not 5% of the neighborhood. And an issue bought up then revolved around the circle of reviewers who get reviewed and are asked to respond. They then know who zinged them. Guess who gets zinged at the next opportunity? We have appraisers who despise each other over what the other thinks (and well may be right) was a bum review.

A few years ago, our state board had to put out a newsletter requrest for reviewers who turned in someone for a bad appraisal to at least read Std 3 and be prepared to defend their reports because they were going to ask for them too. While many complaints were legitimate, the reviews sent in by the state were equally flawed ending up with both the OA and the RA getting sanctioned.

There is a simple experiment that would tell us a lot. Not that anyone would ever run it.

Pick a series of properties .
Send out 2 competent appraisers of equal experience neither knowing another appraiser is working on this. Review all the appraisals by one using randomly selected reviewers. Measure the deviation in conclusions between the 2 appraisers and the reviewers and OA...I'm betting there is statistical evidence of bias by the reviewers.
The majority of the appraisal reports that were "flagged" that I reviewed did have issues - mostly reporting issues and mostly related to appraisers making zero effort to explain what they were doing or how they came to certain decisions. Going through I could tell those decisions were okay but in skimping on the report the appraiser basically steered their work into the review pipeline.

As a reviewer I have my own obligations, one being to not "un-see" a deficiency that anyone with half a brain could see. Me calling the failure to provide the specific zoning as is required isn't the same thing as me saying the report shouldn't be used or that the appraiser's value conclusion was unreasonable. It's a simple error that the appraiser shouldn't have made. In the real world appraisals don't need to be perfect to be usable in the market. Why anyone thinks otherwise escapes me.

Squabbling over 4% vs 5% commercial composition is ridiculous in my opinion and appraisers should complain about petty and subjective nitpicking like that. Same thing with squabbling over a 1% difference of opinion, or even 5% in some cases. That's an example of accurate vs reasonable and is directly attributable to the GSE stupidity with their review forms. They created that problem, not the appraisers.
  #16  
Old 03-10-2013, 02:56 PM
Sunshine in VA's Avatar
Sunshine in VA Sunshine in VA is offline
 
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Quote:
Originally Posted by J Grant View Post
An individual appraiser's incompetence as a reviewer is a diff matter than accusing all reviewers of hindsight bias.
I don't see where all reviewers were accused of being bias.

Quote:
Originally Posted by Sunshine in VA View Post
I have seen retrospective field reviews with an effective date at the height of the subject's market that are performed many years later with the hindsight of the housing crisis that I believe are biased.
  #17  
Old 03-10-2013, 03:13 PM
Terrel L. Shields's Avatar
Terrel L. Shields Terrel L. Shields is online now
 
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Quote:
I don't see where all reviewers were accused of being bias
Everyone is biased. To claim you are not is a failure to recognize your bias. Biases can be your friend, but they can also be your enemy.
Judgment is a bias. It involves the heuristic - that rule of thumb, judgment, intuitiion or whatever you call it that differentiates you from a computer algorithm.

A contract is a "bullseye" but so what? If you have access to the listing, the past history, the assessed value, etc. all that impacts your opinion of the value of the property. Lack of a contract doesn't mean you have no bullseye.

The method which reviews are done is an issue as George points out the GSE problems but I agree with Sunshine that the further in the past an appraisal was performed, the less accurate the review can be and in those reviews of years gone by, I think it totally impossible for a reviewer to get out of their head the idea that the market did what it did 2007-2013 and place their mindset back in that time frame when prices were strong and at worst according to the NAR "it's a great time to buy as this downturn won't last long...blah blah blah." Think back to 2006. We saw signs of housing pricing stress and what were the talking heads saying? The market would cool gently. Don't worry. It will roar back after a pause just like the stock market ... (which was strong until the summer of 2008 as I recall.)

You will not escape the hindsight bias unless you really compensate for it; and you especially cannot escape the anchor bias no matter how hard you try.
http://www.sciencedaily.com/articles/a/anchoring.htm
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  #18  
Old 03-10-2013, 05:31 PM
J Grant's Avatar
J Grant J Grant is offline
 
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I agree that reviewers should have more than 5 years experience, take additional education relevant to reviews etc.

Clients should pay more and allow more time for them as well.

Pick a series of properties .
Send out 2 competent appraisers of equal experience neither knowing another appraiser is working on this. Review all the appraisals by one using randomly selected reviewers. Measure the deviation in conclusions between the 2 appraisers and the reviewers and OA...I'm betting there is statistical evidence of bias by the reviewers
.

This is done routinely by lenders on high value properties typically over a million, they send two different appraisers out, then the reports are reviewed to see if there are variances of value (no idea what the tolerance is), as well as looking over the comp selection or conclusions in report.
  #19  
Old 03-10-2013, 05:46 PM
CSP 49 CSP 49 is offline
 
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The experiment goes like this. A group is divided into two and given a "fact" (true or not.)
Half are told:
There are 1200 dentists in greater Chicago. How many lawyers do you guess are in the same area?
The other half are told:
There are 4800 dentists in greater Chicago. How many lawyers do you guess are in the same area?

Obviously, the number of dentist v. lawyers doesn't have much to do with each other. But the experiment on any sizeable population is likely to show that people would guess all over the map....but the average estimate of the first question will be lower than the average estimate by the second.



I don't think that example demonstrates a bias at all. While there is no direct link between the number of dentists and lawyers I'd be suprised if the second group did not come up with a higher number 100% of the time. I would think most people see the examples inferring a higher overall population that would support more lawyers, electricians, gas stations, pizza shops, etc.

I also don't think there is a 100% bias in reviews. Like anything else its, a matter of experience and learning that my way of approaching a situation may not be the only correct way. Once you learn there are other valid paths to a solution bias need not exist.

The big problem is conscious bias and the need to show how clever you are in a review.
  #20  
Old 03-10-2013, 07:36 PM
Terrel L. Shields's Avatar
Terrel L. Shields Terrel L. Shields is online now
 
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Quote:
I don't think that example demonstrates a bias at all.
Then you don't understand anchor biases. Why would you then go on to say folks would come up with the higher number. That number gets put in your head.

It's why the seller asks a higher price for his car, boat, horse, cow, RV, whatever. You try to set the buyer into the mood that ...gee, he came down 30% on his price, it must be a good deal.... You see it all the time in Auctions - people will buy used 'stuff' for more than it costs new. There is a very good discussion of the subject in N. N. Taleb's book, "Fooled by Randomness"...
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