Geographic Competence

[Overimprovement]

What is your opinion of the importance of geographic competence as it relates to residential appraising? We are seeing an uptick in alternate valuation methods where the appraiser will not even be visiting the subject location. This could lead to a generation of appraisers who never step foot out of the office except to go to lunch.

If this is so in their local town, what would stop them (other than state licensing, which is easy to get for states with reciprocity) from doing these types of appraisals nationwide?

Obviously there is the competency provisions in USPAP, but USPAP simply states you must be competent, it does little to specify what that means with regard to geography.

We (including myself) all think that because we have been appraising in X area for Y years, that we have therefore developed an expertise in the local market that is not able to be matched by a new entrant.

It is interesting that as far as I know, RE appraising is the only field that seems to have such a geographic limitation/barrier to entry. Surveyors, engineers, physicians, lawyers, plumbers, electricians, teachers, title searchers, etc can basically move anywhere, and once some clients are obtained, simply set up shop. But not appraisers. Or can they?

Thoughts?

 

[Meandering]

My thoughts,

If an appraiser can sit at a desk and do it, so too can a computer.

All computers need is E&O insurance and the rest is moot.

.

 

[Carnivore]

I agree with your premise. If one thinks about it a moment or two you would begin to realize that every time you drive to an on-site inspection your knowledge base of the surrounding market is being updated. i.e When you observe a new ramp opened on the interstate, new bridge's, new apartment/condo's and other development including commercial properties. You also observe land use changes, population shifts, gentrification and a host of other characteristics that effect the market.

All that will disappear or at least erode over time.

 

[Rlong]

I think my answer is the classic, "it depends". How far and how complex. I probably am competent (22 years of a huge range of properties) to appraise "most non-complex to moderately complex residential properties in my multi-state region. Now I don't for many reasons, but I have reviewed (in a bank roll) in this region. That said It would be easy to come upon a property that has a unique location condition that I was not aware of (confirming with brokers might mitigate this, but their willingness to help likely varies by region as well.)

BUT to your actual question, the problem with Bot (robot/computer) valuations is they will not "know" when they have stumbled into the complex or (micro) externality issue. I'm not happy about it but "Bots" likely can and will take over a significant portion of cookie cutter valuations. AND they will likely "norm" values in the markets. (those that fixed theirs up, and/or are better located in the neighborhood will be "low"; and if you never do a thing to your home and run it into the ground next to the arterial, your value will be "perfect" (well, for you, not for the lender!)

Location competency IS important... and AI and the Bots will sell us that either it is not THAT important and/or "we got this".

 

[J Grant]

I agree with your premise. If one thinks about it a moment or two you would begin to realize that every time you drive to an on-site inspection your knowledge base of the surrounding market is being updated. i.e When you observe a new ramp opened on the interstate, new bridge's, new apartment/condo's and other development including commercial properties. You also observe land use changes, population shifts, gentrification and a host of other characteristics that effect the market.

All that will disappear or at least erode over time.

Exactly. The spiel about bifurcated/hybrids is it allows appraiser to stay at desk and analyze the "data" which is ( they say ) "what appraisers do best ". But it in mass and over time it can devolve to analyzing data in a vacuum.

Because appraisers don't just anlayze data, they analyze properties, and as you astutely note, going into the market and walking sites /observing properties and neighborhoods / interacting with RE agents, builders, buyers, sellers builds a base of experience and knowledge which is what makes the appraiser credible at data analysis.
Because the appraisal is an integrated product combining not just data but data in the context of the properties and their locations.

 

[Jerry Bone Jr]

What is your opinion of the importance of geographic competence as it relates to residential appraising? We are seeing an uptick in alternate valuation methods where the appraiser will not even be visiting the subject location. This could lead to a generation of appraisers who never step foot out of the office except to go to lunch.
If this is so in their local town, what would stop them (other than state licensing, which is easy to get for states with reciprocity) from doing these types of appraisals nationwide?
Obviously there is the competency provisions in USPAP, but USPAP simply states you must be competent, it does little to specify what that means with regard to geography.
We (including myself) all think that because we have been appraising in X area for Y years, that we have therefore developed an expertise in the local market that is not able to be matched by a new entrant.
It is interesting that as far as I know, RE appraising is the only field that seems to have such a geographic limitation/barrier to entry. Surveyors, engineers, physicians, lawyers, plumbers, electricians, teachers, title searchers, etc can basically move anywhere, and once some clients are obtained, simply set up shop. But not appraisers. Or can they?
Thoughts?

Sitting at a desk vs visiting the field is not a proper test for geographic competence.

 

[J Grant]

What is your opinion of the importance of geographic competence as it relates to residential appraising? We are seeing an uptick in alternate valuation methods where the appraiser will not even be visiting the subject location. This could lead to a generation of appraisers who never step foot out of the office except to go to lunch.

If this is so in their local town, what would stop them (other than state licensing, which is easy to get for states with reciprocity) from doing these types of appraisals nationwide?

Obviously there is the competency provisions in USPAP, but USPAP simply states you must be competent, it does little to specify what that means with regard to geography.

We (including myself) all think that because we have been appraising in X area for Y years, that we have therefore developed an expertise in the local market that is not able to be matched by a new entrant.

It is interesting that as far as I know, RE appraising is the only field that seems to have such a geographic limitation/barrier to entry. Surveyors, engineers, physicians, lawyers, plumbers, electricians, teachers, title searchers, etc can basically move anywhere, and once some clients are obtained, simply set up shop. But not appraisers. Or can they?

Thoughts?

You bring up so many issues but I'll touch on a few.

A driving characteristic of RE properties and thus RE valuation is that properties have fixed location. Thus, evaluating the location and nuances of it enters into the valuation of any property. Contrast that to appraising other items which do not have fixed location, such as appraising jewels, antiques, art. These items can be shipped anywhere in the world to be acquired. Their value can be based on quality, rarity, what similar sold for, provenance etc but not fixed location. But in art appraising, for example, an appraiser would over time develop a "Sphere of competence", or expertise, which is true of the other professions you mention.

Thus an art appraiser usually does not just appraise "art", they specialize, such as contemporary art or impressionist art or 18th century art..that becomes their area of expertise/competence and reputation, should they switch to another area of art they might have to start almost from scratch.

An appraiser can relocate just as any other professional can and gain local area competence and clients.

 

[J Grant]

Exactly. The spiel about bifurcated/hybrids is it allows appraiser to stay at desk and analyze the "data" which is ( they say ) "what appraisers do best ". But it in mass and over time it can devolve to analyzing data in a vacuum.

Because appraisers don't just anlayze data, they analyze properties, and as you astutely note, going into the market and walking sites /observing properties and neighborhoods / interacting with RE agents, builders, buyers, sellers builds a base of experience and knowledge which is what makes the appraiser credible at data analysis.
Because the appraisal is an integrated product combining not just data but data in the context of the properties and their locations.

Since fundamentals of appraising apply everywhere, appraisers to an extent, can appraise properties they have never visited, including in areas they have no experience with. However each time they get such an assignment it is a roll of the dice . Because on one assignment lack of local knowledge/experience is not an issue, for the next appraisal it is. The problem then is because the appraiser lacks the context of local knowledge and experience, they are not able to tell which is which.

 

[chad hampton]

It's already such a mess. We have hybrids that are being signed by certified appraisers that are located in states thousands of miles away and based on online data, haven't even lived in my state in the past 5+ years at least.

The sooner these "alternative" products go away, the better. State boards should be addressing these products as they will seen be investigating them. Hate to think appraisers will sooner or later be in front of state boards defending these work products. Glad it won't be me.

 

[J Grant]

https://www.vwart.com/?gclid=CjwKCA...4UhuS7kqXTDORBwLB7KFGsoaa1ARMkFBoCEHUQAvD_BwE

Just for comparison...art appraiser site. Very interesting...note how each one specializes in a certain kind of art ( their equivalent of "geo competency" ) and that their reputation comes from years of attending auctions art galleries and collections all over the world .

Besides their education, it is their year after year experience with hands on in person examination of art and immersion in the market (for them, interacting with collectors, auctions etc ) that make them an appraiser of art, rather than someone who looked a a few photos of paintings, then sits at a computer with a list of auction prices and analyzes art sales "data"