"Quantifiable Market-Derived Methods" for adjustments required by FNMA/USPAP

[chad hampton]

In my view, it is this type of language that drove the ASB to clarify that "experience" is not a valid method of support. You state that you are using "experience and expertise" when, in fact, you are (based on your own words) using data (the cost new), not "experience"

I have no doubt that’s why they did it. But those people shouldn’t be in the positions they’re in if they’re making that kind of statement.

You were a working appraiser once, you know experience and knowledge in the market is a valuable thing. It’s the most valuable thing.

I understand your position now doesn’t allow you to state that.

As far as your last sentence, I never said I adjust something at the cost It is to build it. But that is a valuable piece of information to have. That coupled with your experience in the market can allow you to make an educated guess on what a reasonable adjustment is in the end, that’s what an appraisal is, an opinion and educated guesses on things. I think that’s been lost over the last decade in this profession. You pay a relatively small fee for a professional estimate and opinion.

There’s no way to get around it, just using poles as an example, not all pools are created equal. I make varying adjustments for pools, pools and spas, poles and cabanas, travertine decking versus concrete decking, I’m sorry, but in the real world, a reasonable educated guess is the best you’re doing, and it starts with knowing the difference in cost of these things.

But if a graph makes you feel better, I can make one up.

 

[chad hampton]

MLS data is valuable, and like it is the only alternative to public records, which might be more accurate (or not) and has limitations. I vet the MLS data as you describe.

The problem is that regardless of the data source, if each sale was vetted by an appraiser or operator before the stats were run, it would be too time-consuming. Agree with your post overall though !

Absolutely, I agree 100%. It’s the best information we have available, and it’s also the information that real estate professionals use. So it’s valuable. But an appraiser does have to go through each and every listing on their own, that’s where experience matters.

I couldn’t disagree more with this concept of take 50 sales in a market push a button and import it into a spreadsheet and have it kick out answers. That’s a bad method of determining adjustments.

 

[Non Sequitur]

In my view, it is this type of language that drove the ASB to clarify that "experience" is not a valid method of support. You state that you are using "experience and expertise" when, in fact, you are (based on your own words) using data (the cost new), not "experience"

Maybe, but anyone can play 6 Degrees to REVAA and form their own opinion as to what drives the ASB's motivations.

 

[DWiley]

I have no doubt that’s why they did it. But those people shouldn’t be in the positions they’re in if they’re making that kind of statement.

You were a working appraiser once, you know experience and knowledge in the market is a valuable thing. It’s the most valuable thing.

I understand your position now doesn’t allow you to state that.

As I noted in an earlier post, value can come from analyses and data from prior assignments. But the "experience" itself is not support. And, it may actually be a detriment - remember, the fact that something was done does not mean it was done correctly.

I recently spoke to an appraiser who cited all the "experience" he had in estimating site values in an area. But, it turns out that his "experience" consisted of looking up the land value on the tax card and using that as the site value in his appraisal. How would you rate the value of that "experience"?

 

[chad hampton]

I would agree if somebody made the statement that the real reason they said this is that too many appraisers were making $2000 fireplace adjustments on $800,000 homes. What they should’ve said is appraisers, your adjustments need to be reasonable.

My 25 years of experience valuing residential real estate tells me most buyers look at things in terms of percentage of a cost of a home.

You can’t make a 25K screen porch adjustment on $150,000 home. But a 25K porch adjustment is insignificant on a $4million home. 25K is what the front door might cost.

 

[chad hampton]

As I noted in an earlier post, value can come from analyses and data from prior assignments. But the "experience" itself is not support. And, it may actually be a detriment - remember, the fact that something was done does not mean it was done correctly.

I recently spoke to an appraiser who cited all the "experience" he had in estimating site values in an area. But, it turns out that his "experience" consisted of looking up the land value on the tax card and using that as the site value in his appraisal. How would you rate the value of that "experience"?

So his land values were wrong? Shouldn’t your issue be that his land values aren’t reasonable/wrong as opposed to not supported?

What in the world is the goal here? Accurately value real estate or incorrectly value it but as long as there’s a chart and graph showing support, that’s good enough? I realize in a world of only mathematical factual statements, you would have accuracy and support. The world of real estate is not math and science formulas were the answer is either right or wrong. That’s why we live in the world of opinions.

If a lender or client has too many issues with a professional’s opinion, they can go find another professional. It happens every day in every profession.

 

[J Grant]

As I noted in an earlier post, value can come from analyses and data from prior assignments. But the "experience" itself is not support. And, it may actually be a detriment - remember, the fact that something was done does not mean it was done correctly.

I recently spoke to an appraiser who cited all the "experience" he had in estimating site values in an area. But, it turns out that his "experience" consisted of looking up the land value on the tax card and using that as the site value in his appraisal. How would you rate the value of that "experience"?

Except for a smaller segment of appraisers who are alleged to state they used their experience to arrive at X, we are not arguing for that. However, experience, including field experience, is the differential wrt being able to competently analyze the property, the area, and the data, including which comps to use and which to exclude, which adjustments to apply, and how relevant a cost or income approach is.

 

[DWiley]

Has it occurred to those of you who are being so critical of using software, that you have been using software to do the basic math for you on every appraisal report that have ever produced using formsware? I mean, unless you are doing the math in the grid by hand and just typing it in.

And, by the way, that is how software should be used - to do the basic math and to do it in a way that the appraiser understands. No one should be using tools when they don't know (exactly) how those tools work. Some of the tools out there are quite good, IMO. Others use methods that are actually contradictory to fundamental principles, and I would never use them myself.

Numbers from software that one does not understand are no better than using a list, or a dartboard.

Having said that, having support for adjustments is not some "trendy new thing" - it is, and always has been, a fundamental requirement of USPAP.

 

[DWiley]

So his land values were wrong? Shouldn’t your issue be that his land values aren’t reasonable/wrong as opposed to not supported?

It is not an either/or situation. The land values were wrong because they were not properly supported. He just relied on his "experience" rather than a recognized method

And, you continue to miss the point about the term "experience." Suppose you are appraising a home in a new development. Then, a very short time later you get an assignment for a virtually identical home on a similar site in the same development. It is the data and analyses that you have from that prior assignment that is valuable in the new assignment - not the mere fact that you did it.

 

[BRCJR]

Has it occurred to those of you who are being so critical of using software, that you have been using software to do the basic math for you on every appraisal report that have ever produced using formsware? I mean, unless you are doing the math in the grid by hand and just typing it in.

And, by the way, that is how software should be used - to do the basic math and to do it in a way that the appraiser understands. No one should be using tools when they don't know (exactly) how those tools work. Some of the tools out there are quite good, IMO. Others use methods that are actually contradictory to fundamental principles, and I would never use them myself.

Numbers from software that one does not understand are no better than using a list, or a dartboard.

Having said that, having support for adjustments is not some "trendy new thing" - it is, and always has been, a fundamental requirement of USPAP.

I have always loved seeing the 138-dollar adjustment the software program makes for the tenth of an acre difference in site size.......