Hypothetical Or Extraordinary Assumption?

[Walter Kirk]

Ben,
The subject is in Camden. Permits...we don't need no stinking permits!

 

[Jim Onderisin]

I like Pam and Greg's suggestions. You are all set if you can produce pictures and/or witnesses to the condition who are not related to the client.

I might be wrong, but if you can verify the former condition of the property and are doing a retrospective appraisal, you're not working with either a hypothetical condition or an extraordinary assumption. You are dealing with facts and should progress with the appraisal straight-away. If you can't verify and substantiate the condition on the date of sale, then you would be making the extraordinary assumption that what you think existed on that day in fact did exist. And that would lead to the question on what do you base your assumption?

 

[Don Clark]

B) Jim,

I agree. The only evidence that is needed is what is was like at the retrospective date, not what it is now. Maybe even old photos by the former owner, the new owner, or an old appraisal with photos. The actual condition as of the retrospective date is what is at issue, not an assumption or hypothetical.

 

[Fred]

The thing is not to make a big deal over it. Most value dispute situations involve retro value dates (property tax, condemnation, etc.).

Keep a log: who called, what date, what reported. The “mistake” is not what the appraiser cannot discover, but not discovering the readily available.

What others tell you about property condition is not “facts.” You will make decision (assumptions) about whose story to rely on.

 

[Tawfik Ahdab]

I have no way of proving that the property was a shell.

Jim, Don, Steven: What facts are there to ascertain in light of his stating the above?

You mention facts, but that's precisely what he states he lacks.

Am I reading him too closely?

 

[CANative]

The extraordinary assumption is that the lawyer's client is not lying in order to hide assets. This would be an easy assignment if it was not a contested issue.

The nuts and bolts of the assignment are no different from an ordinary retrospetive appraisal. The appraiser just has to do some detective work to reasonably support his use of an extraordinary assumption. IMO, this is an EA because the key information is uncertain. I suppose if one gathered sufficient evidence that could not be disputed, then there would no longer be a need for the EA.

What about this. What if the appraiser instead used a hypothetical condition (that the house was a shell) for purposes of comparison? The ball would then be in the lawyers court to prove that the house was a shell at time of sale. This way, the appraier doesn't have to be the detective.

 

[Fred]

Tawfik,
Did I mention "facts" or the absence of facts?

I think you are missing the point. The intended users don't need the appraiser to answer the un-answerable. They need the appriaser to answer the answerable.

At this stage, it seems they want one number based on one set of premises. That may change. It may well come down to a finder of fact with jurisdiction deciding for purpses of this matter what condition the property was in. Along the way, they need an appraiser to say this is value as if in condition 1, as if in condition 2, etc. Perhaps, at some point the appraiser will be calleed a second time to testify as to how the last value opinion would be adjusted if the fireplace was only half completed instead of fully completed. That's what happens in value disputes.

 

[Farm Gal]

Originally posted by Greg Boyd@May 17 2005, 07:40 AM
What if the appraiser instead used a hypothetical condition (that the house was a shell) for purposes of comparison? The ball would then be in the lawyers court to prove that the house was a shell at time of sale. This way, the appraier doesn't have to be the detective.

:blink: Uh Greg? Hypothetical is soemthing known to be false but instilled into the consideration for the purpose of valuation of something which is not presently (as of effective date) true.

That would in effect set the tone by stating that the described hypothetical condition value was the converse (false) of the alleged 'truth' that the appraiser is being asked to solve for!

Better to use the Extraordinary Assumption tool, describe the assumed truth (and an abbreviated summary of the basis for the assumed truth) and give them the value based on that assumed truth which you have no reason to believe is anythin' but the truth, the whole truth, and nuttin but the truth...

One it is clear what basis you used for developing the value

it remains up to someone else to do any furhter detective work to determine which truth the court wants to entertain. You stay Joe Friday about it all. If da judge changes the rules, you STILL stay Joe.

 

[CANative]

Hypothetical conditions assume conditions contrary to known facts about physical, legal, or economic characteristics of the subject property; or about conditions external to the property, such as market conditions or trends; or about the integrity of data used in an analysis.

We're fact checkers, not lie detectors.

An HC would take the onus off the appraiser for doing unqualified detective work.

 

[Pamela Crowley (Florida)]

I would do everything I could to locate photos, the appraisal from the purchase of the 'shell', talk to the current owners and neighbors, etc ... to find out everything I could about the condition of the property at that time.

From there, I would document what I did, what I found out, what I believe to be true, and use the Extraordinary Assumption that what I believe to be true is true, but is not guaranteed.

Just do it and make sure you charge enough to make it worth all the time it will take.