Appraisal Bias

[alebrewer]

I don't ask how others reconcile so I would not know teh answer to that. I think in some cases using a mean to reconcile might represent the most probable price per the market and property and in other cases it would not

Reconciling to a mean if rote is averaging and many caution against averaging. using a mean or median to reconcile makes it into a math solution, rather than a market based problem

The appraisal asks for a market value opinion. It does not ask for a mathematical value opinion.

From the Fannie Selling Guide B4-1.3-11 (bold added by me):

The reconciliation is based on the appraiser’s judgment of the results developed as part of the valuation process and must never be an averaging technique with the exception of the use of a weighted average technique that includes proper explanation. (hint: mathematical mean and average are the same thing)

 

[Tom D]

rural appraisers are the navy seals of our business. i, unfortunately consider myself a privileged appraiser. big old city, 10-15 sales with several blocks. when done most of the time, my adjusted range is usually within 5% up to 10%. i get paid the same for my little row home as yous do for whatever. but then, my little row home is probable a higher sale price than many suburban homes. as far as sale prices, when i was a broker it was all emotions and buyer hot buttons. comps only came into the cma when you were listing a property. although, the listings that you were showing the buyer were in a grouped $ range, which was their affordable monthly payment, not a pov.

 

[J Grant]

Wait - are you now saying that the market itself distills property values down to the dollar as well? If so - I simply have no response to that. I cannot make my brain soften that much.

I did not say the market itself distills property values down to the dollar as well. Stop claiming things to me I did not say or mean

I said the appraisal problem is a market-based problem to be solved, not a math/statistical problem to be solved ( though math or statistics can be used in the process

If the market can recognize the difference between 290k and 300k, then the appraiser should be able to do that as well. Are you saying a buyer does not care about the difference between 290k and 300k or that a seller does not care? I sold RE for 5 years prior to appraising. Yes they know and care, people pull out of deals for 10k

So I fail to agree with the assertion that "any number" is as good as another as a reconciliation point.

 

[J Grant]

From the Fannie Selling Guide B4-1.3-11 (bold added by me):

The reconciliation is based on the appraiser’s judgment of the results developed as part of the valuation process and must never be an averaging technique with the exception of the use of a weighted average technique that includes proper explanation. (hint: mathematical mean and average are the same thing)

Well you are the advocate for means or median it appears, ? Not me-
I never reconcile to a median or mean. I use my judgment and my judgment is that some numbers better represent the OMV and probable price better than others and they are not all the same as each other, which you have claimed, among a value range.

 

[alebrewer]

which was their affordable monthly payment

This is such a rotten way for folks to do business (not pointing a finger at you at all). I HATE when MB's or car salesmen/women try to get the consumer to focus on the payment. SSSOOO much is hidden in that payment. IMO - the art of negotiation and a fundamental understanding of compound interest should be required for high school students.

 

[alebrewer]

Stop claiming things to me I did not say or mean

Apparently you now misunderstand the difference between a question and a claim. A question is where you ask someone for clarification (as I did in my post). A CLAIM is where you accuse someone of being or doing something (as you do in literally every post you make).

not a math/statistical problem to be solved

Of course it's a mathematical/statistical problem to be solved. Personally, I'm aghast you haven't realized that after having been in the biz for so long. One simply has to peruse the tools we use to interpret market behavior - they're math tools (extraction, paired sales analysis, regression, etc.).

Are you saying a buyer does not care about the difference between 290k and 300k or that a seller does not care?

Finally - a question instead of an accusation/slander. No - I'm not saying a buyer doesn't know the difference. A 'buyer', however, is different than a 'market' (hint: a market is made up of several buyers - as well as sellers). How can you not see that?

So I fail to agree with the assertion that "any number" is as good as another as a reconciliation point.

Again - you've demonstrated a firm lack of understanding on this topic, so it will come as no surprise that I don't care whether you fail to agree or not.

 

[alebrewer]

Well you are the advocate for means or median it appears, ? Not me-
I never reconcile to a median or mean. I use my judgment and my judgment is that some numbers better represent the OMV and probable price better than others and they are not all the same as each other, which you have claimed, among a value range.

You really don't understand maths, do you? Brief refresher:

• mean: mathematical average (what you get when you sum all individual observations and divide that number by the number of observations)
• median: the value in the middle of a data set
• mode: the value that occurs most frequently in a data set

Now, assuming you've got that - here comes the hard part. All three are measures of central tendency, but not all three are averages. Only the mean is an average.

As a side - it's also ONLY the mean that fails to account for outliers - hence the GSE guidance on not using a mean.

 

[J Grant]

You really don't understand maths, do you? Brief refresher:

• mean: mathematical average (what you get when you sum all individual observations and divide that number by the number of observations)
• median: the value in the middle of a data set
• mode: the value that occurs most frequently in a data set

Now, assuming you've got that - here comes the hard part. All three are measures of central tendency, but not all three are averages. Only the mean is an average.

As a side - it's also ONLY the mean that fails to account for outliers - hence the GSE guidance on not using a mean.

Most probable price is not a math problem to be solved in an appraisal. It is a market problem to be solved

That is why it is called a MARKET value, the $ equivalence of value as a reconciliation point is supposed to come from our analysis of the market, not by applying rote math.

 

[J Grant]

From the Fannie Selling Guide B4-1.3-11 (bold added by me):

The reconciliation is based on the appraiser’s judgment of the results developed as part of the valuation process and must never be an averaging technique with the exception of the use of a weighted average technique that includes proper explanation. (hint: mathematical mean and average are the same thing)

They are saying the appraiser should use judgment, , not that the appraiser should use math or statistics.

 

[J Grant]

Apparently you now misunderstand the difference between a question and a claim. A question is where you ask someone for clarification (as I did in my post). A CLAIM is where you accuse someone of being or doing something (as you do in literally every post you make).


Of course it's a mathematical/statistical problem to be solved. Personally, I'm aghast you haven't realized that after having been in the biz for so long. One simply has to peruse the tools we use to interpret market behavior - they're math tools (extraction, paired sales analysis, regression, etc.).


Finally - a question instead of an accusation/slander. No - I'm not saying a buyer doesn't know the difference. A 'buyer', however, is different than a 'market' (hint: a market is made up of several buyers - as well as sellers). How can you not see that?


Again - you've demonstrated a firm lack of understanding on this topic, so it will come as no surprise that I don't care whether you fail to agree or not.

Now all you are doing is acting spiteful and lobbing insults, and it is not even a discussion of the topic any longer