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NC Judge says NCAB Investigators not subject to USPAP

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Austin

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified General Appraiser
State
Virginia
George:
I think I understand your point but in reference to the case I cited above I also think your argument will not hold water for the following reasons. The appraiser in question had good data, picked good comps in my opinion, did an excellent job of measuring and classifying the buildings, fully complied in content with USPAP to the extent of even having a two page summary check list for FRT compliance. Her answer was not that far off either. Then what is my beef you ask? In reference to standard 1 lets take it one step at the time. This is not a matter of my opinion versus that of the appraiser under review; in my mind it is a matter of the math and appraisal theory. If you perform a simple graphical regression of her GLA vs. unadjusted prices and then GLA vs. adjusted prices, the object of the game is to describe all of the value influencing factors. We have a mathematical measure of this called the R^2 or coefficient of determination. Roughly her before adjustment equation was something like Y= $55x+ $150,000 with an R^2 of 85%, and after making all adjustments something lime Y=$40x +$165,000 with an R^2 of 87%. What that means is that GLA alone explained 85% of the price leaving 15% unexplained. After she finished adjusting she explained only 2% more and still needed a $40 per square foot size adjustment to equalize the data set even after making a $20 per square foot size adjustment from the ether. That all falls into the category of standard 1 errors in my view like not using proper appraisal methods and series of errors etc.
Then in her cost approach she used no methodology. Everything had 20% depreciation. Her data was factual right out of Marshall & Swift but her logic, reasoning, and analysis were missing which again in my view is a standard 1 shortcoming.
Her land sale data was also factual but her reasoning and logic were totally void of logic. Sale 1 had 25-acres and sold for $980 per acre. Sale 2 had 75-acres and sold for $1,500 per acre, and sale 3 had 167-acres and sold for $1,900 per acre. Subject was most similar to sale 3 at $1,900 per acre. That is it. There is no way this sale data could be comparable no matter how factual it is. How can you say that analysis is a matter of differences of opinion as to analysis and of no concern? This ain't outcome based appraising. How can you consistently come up with the correct answer using no logical or scientific reasoning with no standard of what is correct and what is not? Sorry but I don't think your argument holds water. That is why I contend that regression is the only rational appraisal method because it gives us a method of verification and a standard of accuracy. If my regression equation explains more of the value influencing factors than yours does and mine predicts the price of all comparable sales with a lower variance than yours, then we have a measure of who is correct and who is wrong. If my way consistently produces answers with less variance and you know that but refuse to conform to the new methods, is that not out of harmony with the intend of standard 1, ie, series of errors for starters? In my view your argument that factual data is the only significant USPAP consideration is just not reasonable. Clients hire me to tell them the correct most probable price and never in 30 years has one called me up and said: "Hey Austin, your data and report content left out standards 1-1a.b, & c and 2-1F-x." We appraisers are working for the client not the ASB. It seems to me you are letting the process over ride the purpose of the appraisal.
 
Joined
Jan 16, 2002
Professional Status
General Public
State
North Carolina
Austin

You make a great case for why your opinion, based on regression analysis, is more credible. It does not prove, in and of itself, that her methods or techniques are wrong or that they were inappropritely utilized.

You provide your review to your client, provide the basis for why your opinion should be held above the other appraiser, the client says I believe in the appraiser or the review appraiser. That ends that.

You can not confuse the review for your client and a review for a board intended to show that some one else is wrong. To prove an appraiser wrong you must show first a more credible solution. You can do that using your regression analysis. Then you must show what they did wrong, either by omitting data, or having used incorrectly a standard technique, or failing to use a technique that a reasonable appraiser would use.

Now you can argue that statistical modelling is the only way to go, but an accepted technique is paired sales. To prove this method as inappropriate, you would have to say the typical appraiser would not use it in this kind of an appraisal. Regretably, we are not there yet in our profession. Alternatively, you could show that the market grid was incorrectly applied or that the sales were not good sales for the derivation of the adjustment. Otherwise, you have a difference of opinion. You may feel that someone pushed value, but unless you can show inconsistencies in the development of their work as a series of errors, all you have is a difference of opinion.

Regards

Tom Hildebrandt GAA
 

Austin

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified General Appraiser
State
Virginia
Tom:
I respectfully disagree on this basis: What you and George seem to be doing is what a lot of appraisers seem to be saying and that is to leave the reconciliation process in a fog with no clear statement of when a practice or method is right on or right off. For example, the purpose of the sales comparison approach is to account for all of the value influencing factors you can account for and the standard to determine if you did a good or bad job is the graph of the GLA vs. adjusted prices. If this equation trend line is flat with a zero slope and all data points are on the trend line, that is the definition of a perfectly adjusted sale. If that equation predicts the price of the subject and all of the comparable sales, what more can you ask for and who can agrue with the results?
As in my example above about the trend lines from the appraisal I was looking at; Looking at her graph of GLA vs. adjusted prices shows that she clearly did nothing and what she did was wrong because she made a lot of adjustments that explained absolutely nothing and when she finished adjusting she essentially was no closer to the correct answer than when she started. That in and of itself is misleading because it says something affected price when it clearly did not and the fact that her result was no closer to the correct answer then when she started demonstrated mathematically that she obviously had no clue as to what she was attempting to do. There has to be a target or some standard of what is correct and what is not. Standards scare a lot of people because when we are measured by the standard we might not like what we see. In my experience that is the main objection to regression methods. Back to my objection to your case with the NCAB for another example; in my view the NCAB has no standard against which they are measuring your actions thus they can do what they want to and get aware with it. You are essentially being killed by your own argument. If there was a clearly written and accepted standard and you violated that standard, then you would be guilty to the extent of your violation. That is my whole objection to this USPAP process, there is no standard of what is right and wrong and given the nature of the appraisal process to some extent I will agree we can't we held to a specific outcome but we must define a standard of what a perfectly adjusted sale data set is and we must have a system to verify our methodology and demonstrate the accuracy of these methods and practices. Otherwise all we are doing is saying: "Take my word for it, I am certified." That is clearly what USPAP was designed to avoid. It is possible to evaluate a data set of comparable sales after adjustments and determine what if anything the appraiser did and what he/she explained or did not explain and show if the appraiser has a clue as to what they are doing. That is a clear standard, it is mathematically correct, theoratically correct, and it scares the heck out of a lot of people but that standard is what stands between appraising as it exists and being recognized as a true profession in my view.
 
Joined
Jan 16, 2002
Professional Status
General Public
State
North Carolina
Austin

You know I do not disagree with the results a properly applied statistical analysis present to confirm or deny a specific adjustment for a relativley homegenous set of data. But it will not work as a validation for a highest and best use or even for an adjustment on a one off property. Therefore, it will not answer the larger questions of scope of work or judgements about these issues. If you want to discuss the validity of statistical regression with me, lets do it on another thread, but please do not expect me to respond until I get finsished dissecting my most recent love letter from the NCAB.

Back on topic

Your basic contention regarding discipline I agree with, we have no defined set of generally accepted practices (incluiding more sophisticated statistical analysis), and that leaves boards open for everything they wish to say is method or technique.

You and I agree about my case, my problem is that the NCAB is arguing that an adjustment is an incorrect method or technique, just because they think it should have been less or more. Yet, they do not say what would be correct or how the correct adjustment should be derived. Incredibly, one of their arguments is that I did not present any evidence of what is correct, as if that is my problem in a legal proceeding. Essentially they just say we do not think the adjustment is right because some adjustment should have been made, therefore it is an inappropriate methodology.

My wife, a former middle school teacher, says you just can not argue with
sixth graders, so why try to explain? The fact is I am now trying to convince a Superior Court Judge, who really could care less about appraisals and the NCAB or Tom Hildebrandt, that this is a substantive matter that deserves his serious consideration.

At any rate, another good intellectual excercise, one that I need to complete by tomorrow so I can give my attorney the ammunition he needs.

Regards

Tom Hildebrandt GAA
 

David C. Johnson

Senior Member
Joined
Jan 15, 2002
Steve Vertin,

Yes, I did get around to reading this thread several days ago (as you predicted in one of your posts), and I do have a few thoughts on several topics discussed. I will post them before long. Good thread.

Thanks.

dcj
_____________________

PS. Tom & wife (captain) are currently sailing the ocean blue...
 
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