Paired sales.

[Terrel L. Shields]

Another example why Reviewing should be abolished. Reviewers imho are mostly done by idiots who get paid more than they are worth even when they provide the service at below cost.

 

[hastalavista]

Another example why Reviewing should be abolished. Reviewers imho are mostly done by idiots who get paid more than they are worth even when they provide the service at below cost.

Terrel-

I won't argue that the level of quality among many reviewers (if I consider the posts regarding reviews on this forum as a sampling) is substandard. And, I say this as an appraiser who once was engaged full time by a bank and credit union to complete reviews (pre- and post-funding).

But here is my question:
Do you believe that an appraisal review is not a useful valuation product and therefore should be eliminated, or do you believe because of the poor quality of the reviewer they are not useful and should be eliminated (because in the hands of an idiot, they do more harm than good; so better to eliminate them all).

I think the concept of an appraisal review is very useful.
I think the poor quality reviewers should be eliminated.
I'd hate to throw out a useful appraisal tool because of useless producers of that tool.

 

[Howard Bouchard]

I think the "tool" of appraisal review is being abused by the users of appraisal services. Oftentimes it seems as though they are only looking for a second appraiser's opinion in order to confirm a value they know is inflated. Otherwise they are having a review completed on an appraisals that is so poorly executed that it is rendered beyond the scope of typical review, thus it becomes a big time soaker for the review appraiser. Maybe they have good appraisals reviewed but I just haven't seen many. Perhaps there should be some requirement to do a certain number of reviews on a random basis while at the same time paying the reviewer a decent fee to complete the work? I would think that would naturally be the case if there were more recourse for lenders who end up financing bad loans.

 

[residentialguy]

Reviewing can be a good tool, as long as the reviewer isn't a tool.

 

[NorthTexValuation]

Dear UW,

You are incorrect. Not all adjustments in the Sales Comparison Approach can be directly extracted or supported by the available market data with a high degree of accuracy. It is impossible and nowhere does USPAP state that all adjustments must be supported by paired analysis. This stipulation would make every assignment an unacceptable for an appraiser. Some adjustments have an element of subjectivity and professional judgment which the appraiser has applied based on prior observations of the reactions of typical/knowledgeable buyers' and sellers' in the marketplace. As a professional appraiser, I am constantly analyzing the market and I am in contact with other Real Estate Professionals - agents and appraisers, as well direct market input with having personal interviews with buyers and sellers. Finally, the adjustments are refined using sensitivity analysis within the grid and tested for reasonableness with the selected comparables. This method is a standard and well accepted practice within the appraisal industry. It is NOT a USPAP violation as USPAP Standards Rule 1-1 states; "In developing a real property appraisal, an appraiser must be aware of, understand, and correctly employ those recognized methods and techniques that are necessary to produce a credible appraisal".

The Appraisal institute touches on this exact subject. Appraising Residential Properties, 4th Edition, Appraisal Institute, Page 342, "Limitations of Paired Data Analysis" states: "...This brief discussion of paired data analysis may seem to suggest that identifying the effects of property differences from market data is a straightforward procedure that can produce accurate, complete mathematical results in all appraisals. Such an impression would be misleading. Appraisers develop an opinion of market value by applying their judgment to the analysis and interpretation of data. Paired data analysis is a tool that an appraiser can apply to market data in some circumstances. When used in conjunction with other analytical tools, this type of analysis supports and guides the appraiser's judgment, but it does not take its place. Perfect sets of comparables that vary in a single, identifiable respect are rarely found. Because properties that are sufficiently similar to the subject are usually limited in number, the decision to apply paired data analysis in a given situation is a matter of judgment. Often the sampling size may not be larger enough to provide a solid statistical foundation for the appraiser's conclusions..."

I am a bit concerned that a Reviewer can't grasp this and encourage you to gain competency in this area. It is important for you to have an understanding of basic valuation practices that when appraising atypical or complex properties; or where there is an extreme absence of like elements of comparison; or in instances where the market data is inconsistent with which to draw better supported adjustments and overall value conclusions, individual adjustments cannot be relied on independently.

Good job, but I'll bet this CONDASCENDING "know it all" reviewer won't even read or attempt to comprehend what you are telling him.

He appears to be a guy with a HUGE attitude caused partly by his "position" as a reviewer. I know a few guys like him and they are all A-HOLES that cannot produce good appraisal reports but are damn good at picking apart every little piece of everybody else's.

Those who can (appraise) do, those that can't (appraise) review...

 

[CANative]

Paired sales analysis is a technique, not a mandate.

 

[Terrel L. Shields]

Do you believe that an appraisal review is not a useful valuation product and therefore should be eliminated, or do you believe because of the poor quality of the reviewer they are not useful and should be eliminated (because in the hands of an idiot, they do more harm than good; so better to eliminate them all).

One of our number is well known for his avitar urging that the bullseye be removed. As the law stands, if available, we have to look at the contract. But there is an element of truth. The "bullseye" is a target for Skippy. But there is an even bigger issue. It is called the anchor bias. It is impossible to overcome. You have an "anchor" - the original report. Your bullseye is either to match or dispute what you find. Your focus is on one or the other. There are all sorts of pyschological tests that prove you cannot defeat the bullseye even when you know it exists.

If you ask someone how far it is to the airport and you already know it is a 30 min. trip, by saying, "How long will it take me to get to the airport, 10 minutes? The reply will normally be "Nah, it will take 20 minutes." But if you ask the question, "How long will it take me to get to the airport, an hour?" The answer will be higher, say "Nah, it will take about 45 minutes."

In other words, if you are prompted with a low number, you will end up with a lower number than if prompted with a high number. You guess will be skewed towards that "anchor".

That is why reviews are so often wrong. Either they rubber stamp the report (Looks good and they only pay me $125, I can't spend the time on it) or This guy is an idiot and I am going to make him pay....

That is why not only a high percentage of reviewers get to face the board too, it is a reason why a high percentage of them that do also get sanctioned.

The solution is 2 appraisals done by separate parties and each independent of each other's research, each other's biases, and each other reports. THEN, you can vet the two different reports. Yes, I believe reviews should be outlawed. period.

 

[Doug DeMars]

I believe reviews should be outlawed. period.

Maybe you're right. At least the way it works today...

The whole review process must be modified to function properly. Too much of the process demands black and white answers to very subjective questions. The only reasonable way to juxtapose one opinion against another is keep those two opinion makers away from each other. There is is not one good reason to demand a second appraiser to untangle the appraisal of another unless it is to help prosecute them. Is that in the review appraiser's intended use of the report?

I just completed a Freddie Mac review of an awful apprasial completed back in March of 2009 that was about 17% off in market value in the $400K price range.

At every turn in the report, I had to stop and summarize the "issues" for the original report. This is such a waste of time. The only detail that needs to be known from the original report is the physical condition of the property as of the effective date...and hopefully you can gain some detail as to its condition from the original report.

I've done about 10 of these "forensic" reviews where I agreed with only 1 of the original appraisals. Most are a mess.

The fee isn't too bad...but not so great considering the time involved. I enjoy the forensic part and reconstructing the past. But now I wonder...my name is attached to a rather official document essentially making me an accusor. In all likelyhood, the accused will have a chance to rebut my review. (FWIW, 7 of the 10 reports I've reviewed are no longer active appraisers with a license.) Why must I know the name of the original appraiser? My reviews are not personal...but it feels that way sometimes.

 

[J Grant]

Terrel I agree with the first part of your post, disagree with second. I also feel "bullseye" aka contract price influences appraisers, even when they don't want to be influenced by it. However, our job as it stands now, is to consider the contract, including the price, since we know it, then put it aside and appraise the property. Those who can't do that should not do purchase appraisals .

I don't believe two appraisals on one property is always the answer. What if you get two incompetents or two number hitters appraising the same property? Then you just get two bad reports instead of one. Or, what if one report is well prepared, and another not, and the values are 40k apart? How does that get resolved?

The issue is not the reviews, it is the quality and competence of the reviewer, and how well trained they are. A good review is an invaluable resource, while a poorly done review just compounds the problem.

Probably more reviewers are good than not, and more of the origination appraisals they look at are troubled appraisals, than not.

Doing reviews is a great way to expand appraisal knowledge. However, imo, reviewing should have an additional license level and training, and right now with AMC bidding out reviews, the quality of the reviewers can vary too much...I think the skippies would tend to not want to take on reviews as soon as they see how much work they are.

 

[Terrel L. Shields]

I also feel "bullseye" aka contract price influences appraisers, even when they don't want to be influenced by it. However, our job as it stands now, is to consider the contract, including the price, since we know it, then put it aside and appraise the property. Those who can't do that should not do purchase appraisals .

Theory is good. But in the cold light of early morning the truth is we can obtain all sorts of "anchors" and we use those anchors even when we think we can

put it aside

. You only think you've put it aside. This is a psychological flaw in us all even when we are totally aware of it.
We have the sales history, the listing price, oral communications deliberate or inadvertedly provided. We have "anchors" everywhere.

Practice makes perfect only if you practice perfectly. An example. You have a trainee. The trainee does a great job on an appraisal. You praise their work. The next report they do a miserable job and have chosen poor comps. You chew them out. The next job, they do a better job but not like their best job. You conclude that chewing them out works and praise is bad and so you gnaw on them some more.

Does anyone see the flaw in that? Reversion to the mean. Yes, they did an above average job so it suggests that they likely cannot do a better job twice in a row. Praising them will not change the fact they will revert to the mean and do a lesser job.

Appraisers vetted by one reviewer then another, and their handlers are responding by pre-emptive BS, by trying to force comps into the zone of no complaints. I saw a report where the appraiser reported the distance to comps as "same neighborhood"...that works. The problem was that it was the tiny town of Rose, OK and the mail route covers parts of 2, if not 3 counties. The "town" has a school, a PO and a Church. Nothing else. The comps? They were 10 miles apart or more.

Why would he do that? To avoid the stips...no other reason. Without the criticism that he knew he would get for telling the truth, that this is a very rural community and, in fact, it was quite remarkable that there were 3 remotely similiar sales within that rural postal area. What's Fudd's First Law of Opposition? If you push something hard enough, it will fall over?

I see no improvement whatsoever between a review imposing their own biases (don't kid yourself - you are biased and, in fact, if you were not, you'd be a perfectly awful appraiser) and having 2 appraisers appraise a property in the subjective manner appraisers work. This ain't rocket surgery as one wag put it, but it is brain science. The mind works on heuristics and any appraiser who does not understand the principle (whether you've heard of that word or not) isn't worth a crap. You have to understand your bias.

When I go to the doctor and question their diagnosis, am I going to take that diagnosis to another doctor and have him vet the other doctor? Or do I want an entirely different opinion based on his examination?