market analysis conflicts within report

[J Grant]

I think as long as you explain your reasoning, the market trend is whatever your training and experience lead you to believe it is.

Imo, if various appraisers have sound training and relevant experience, they should not come to wdely differing conclusions from looking at the same market data. They should come to somewhat equivalent conclusions.

Two opposite conclusions can not both be corrrect. One of the conclusions from the data will be credible and supportable, the other, not.


An appraisal is an opinion, and statistics can be used to support many different opinions.

It is an opinion developed from market study, and that means more than running statistics.

Thus, if a proper market study is done, which means thorough research of conditions, sales, listings and trends affecting subject market and area, the opinions should correlate to the research . Correct research can not support two opposite conclusions simultaneously. If two oppoiste conclusions are formed, it is more likely that one person did not comprehend the research or is applying the results incorrectly.

Two different appraisers can look at the same data set and arrive at different, well supported opinions of the market trend

I am not arguing this on a personal level, but on a methodology level. How can two differing opinions be both well supported AND credible?

Well supported is only one of the tests,because one can find outlier sales to "support" any opinion of value, and one can frame a statistical search in the same manner. But neither would be credible, if tested against the best substitute comps for subject or credibly developed and explained data search that might include statistics. The same for a market trend, it's either there, or not there, and can be shown through data as well as verified with inerviews and recent experience in the area.

If prices are declining and clearly shown to be declining, how can an appraiser look at the data, and form an opinion that it is not declining, and call that opinion "well supported"? What, exactly, is supporting the opinion?

If a faulty data search is the cause, or the appraiser could not differentiate between the larger market conditiions/prices and the trend effecting subject, then the appraiser mis understood or mis applied the data, and the
opinion is not well supported.

Sticking graphs or charts in a report does mean an opinion is well supported if the greater depth of research shows the true trend is not what a graph, which tends to average prices, showed.

 

[Lee Lansford]

...


The real key in these instances is to EXPLAIN and document ... a reader of the report should be able to understand the thoughts and reasoning for the adjustments, or lack thereof, which are reflected in the grid.

Sometimes its not that the data conflicts so much as it is there is not adequate clear explanation in the appraisal report. Trying to explain after the fact makes the matter even more complicated.

Amen.

....

 

[Meandering]

Posted by gbnumbercruncher: I have personally asked about how they are determining market trends and time adjustments have all stated that the market is fluctuating too much so they just call it stable.

There are no check boxes for erratic, or zero sales, so the default is stable, when mandated to check a box.

Explain, explain, explain. But understand that if you don't put your analysis in the addenda, there is always the open opportunity for somebody to come back and put in whatever analysis they want and call you wrong. You can call my analysis wrong, but you can not say that I did not present my analysis which supported MY opinion and is the requirement.

As far as nit-wits on the other end and their opinion of my opinion and my analysis, it does not count. If they want it to count, they can get certified and Geo-competent and do the report themselves.

They can not direct you in anyway that would change your opinions to what they think your opinions should be. Just support your darned opinions. ALL OF THEM.



.

 

[George Hatch]

It's too bad one of the choices isn't "Inconclusive" or "Conflicting". The real estate markets are imperfect.

 

[J Grant]

How about a choice of "Confusing" .

 

[Esox]

The ERC form has "unstable" as a choice.

 

[J Grant]

Unstable is a good choice to have.

 

[HF Mudd]

Two different appraisers can look at the same data set and arrive at different, well supported opinions of the market trend

I am not arguing this on a personal level, but on a methodology level. How can two differing opinions be both well supported AND credible?

Well supported is only one of the tests,because one can find outlier sales to "support" any opinion of value, and one can frame a statistical search in the same manner. But neither would be credible, if tested against the best substitute comps for subject or credibly developed and explained data search that might include statistics. The same for a market trend, it's either there, or not there, and can be shown through data as well as verified with inerviews and recent experience in the area.

If prices are declining and clearly shown to be declining, how can an appraiser look at the data, and form an opinion that it is not declining, and call that opinion "well supported"? What, exactly, is supporting the opinion?


Let's say the sales below is one possible scenario.

Sales in Market X Which are comparable to Subject:

1/11 - Median S/P = $225,000
2/11 - Median S/P = $225,000
3/11 - Median S/P = $230,000
4/11 - Median S/P = $235,000
5/11 - Median S/P = $230,000
6/11 - Median S/P = $225,000
7/11 - Median S/P = $240,000
8/11 - Median S/P = $245,000
9/11 - Median S/P = $240,000
10/11 - Median S/P = $235,000
11/11 - Median S/P = $230,000
12/11 - Median S/P = $235,000

Median Sales price for 2011 = $235,000
Median Sales price in Q4/2011 = $235,000

1/12 - Median S/P = $230,000
2/12 - Median S/P = $225,000
3/12 - Median S/P = $220,000
4/12 - Median S/P = $225,000
5/12 - Median S/P = $225,000
6/12 - Median S/P = $230,000
7/12 - Median S/P = $230,000
8/12 - Median S/P = $240,000
9/12 - Median S/P = $240,000
10/12 - Median S/P = $255,000
11/12 - Median S/P = $250,000
12/12 - Median S/P = $245,000

Median Sales price for 2012 = $235,000
Median Sales price for Q4/2012 = $250,000

Appraiser A concludes that the market is stable, as median sales prices for 2011 are the same as they are for 2012.

Appraiser B concludes that the market is increasing, as recent trends indicate an increase of approximately 6% in the current quarter over the prior year's final quarter.

As both appraisers aren't talking to exactly the same market participants, their conclusions are confirmed by the market participants they speake with on a regular basis.

Both could be considered to be well supported conclusions based on the available data.

 

[Terrel L. Shields]

they should not come to wdely differing conclusions from looking at the same market data. They should come to somewhat equivalent conclusions.

The variance should reflect the variance of the data. Therefore, in a chaotic market, the variation between appraisal values concluded could and, with a large enough number of appraisers doing the same property, would likely be as statistically variable as the data is. REOs and shorts don't help as one have a broad range to start with.

Two opposite conclusions can not both be corrrect.

Appraisals are opinions, therefore cannot be "correct" or "wrong". The logic can be flawed used to support a value. But the numbers appraiser use are rarely statistically significant. You cannot make 10 adjustments with only 3 comps (or even 6 comps) because, statistically, it is not supportable. But since we can and do those things, the adjustments are basically the product of our own biases....heuristics - judgment, rule of thumb, what ever you want to call it. It is a bias. The bias of "no bias" is a bias as well.

 

[gregb]

Think Terrel is channeling Ludwig Wittgenstein's "Philosophical Investigations"
[url]http://en.wikipedia.org/wiki/Philosophical_Investigations[/URL]