Prediction Of Past Hypothetical Events

[Mr Rex]

Presumption=Prediction

 

[TRESinc]

Presumption=Prediction

not really. i can presume you are an intelligent person because you have, at a minimum, passed an exam to be an appraiser. i cannot predict how accurate your appraisals will be despite the fact you passed the test.

 

[RCA]

Good grief. Here is one for you kids:

https://www.insidephilanthropy.com/...ders-pouring-money-into-the-khan-academy.html

 

[Mr Rex]

not really. i can presume you are an intelligent person because you have, at a minimum, passed an exam to be an appraiser. i cannot predict how accurate your appraisals will be despite the fact you passed the test.

Presumption is an opinion prior to actual knowledge. Sounds like a prediction to me.

 

[J Grant]

What are you guys "predicting?"

USPAP says an appraisal is an opinion, not a prediction. So how can you offer a prediction, instead of an opinion ,and comply with USPAP?

 

[Gobears81]

What are you guys "predicting?"

USPAP says an appraisal is an opinion, not a prediction. So how can you offer a prediction, instead of an opinion ,and comply with USPAP?

There's a reason why none of the commercial appraisers that have participated in this thread or the other one on predictions have denied its predictions. When you do an income approach, you are forecasting future cash flows. Maybe it is assuming that the future will be relatively stable with just one year worth of income analysis shown, or maybe it is a long term cash flow forecast. Same with a residential income approach. The monthly rent that you enter in that field isn't from 5 years ago, it is forward looking, even if it is just looking forward to the upcoming month.

You say, well that's a forecast, not a prediction, right? I looked up synonyms for prediction on Google:

pre·dic·tion
prəˈdikSH(ə)n/
noun

1. a thing predicted; a forecast.
   "a prediction that the Greeks would destroy the Persian empire"
   synonyms: forecast, prophecy, prognosis, prognostication, augury; More

How could you do an income approach without forecasts/ predictions and comply with USPAP?

 

[gregb]

The prediction is that if the subject had been on the market 3 months ago, an opinion is that it would have sold on X date at X amount.

 

[J Grant]

FWIW. people, including experts in their fields who are in the "prediction" business can often be wrong. A weather forecaster says 70% chance of rain around 3 PM. It doesn't rain hat day. A stock analyst advises his client to buy shares of X stock because it will double by end of day. At end of day the stock tanked. They're expertise should make them right more often than wrong or "close" sometimes, but they can just as easily be wrong because they cant control the weather, nor the stock market. Just as an appraiser can not control the actions of individual buyers and sellers on any given day

Therefore an appraisal is a hypothetical model, not a predictive model.

The step by step SOW of the appraisal model supports the opinion of market value, and is communicated in a report to show how they got there. A client or user can choose to rely on the report to make a decision about the property The end.

 

[Gobears81]

FWIW. people, including experts in their fields who are in the "prediction" business can often be wrong. A weather forecaster says 70% chance of rain around 3 PM. It doesn't rain hat day. A stock analyst advises his client to buy shares of X stock because it will double by end of day. At end of day the stock tanked. They're expertise should make them right more often than wrong or "close" sometimes, but they can just as easily be wrong because they cant control the weather, nor the stock market. Just as an appraiser can not control the actions of individual buyers and sellers on any given day

Therefore an appraisal is a hypothetical model, not a predictive model.

The step by step SOW of the appraisal model supports the opinion of market value, and is communicated in a report to show how they got there. A client or user can choose to rely on the report to make a decision about the property The end.

A stock is purchased because the predicted present value of future benefits either meets or exceeds the price for which it can be purchased. A piece of real estate is purchased by an investor because the predicted present value of future benefits either meets or exceeds the price for which it can be purchased. Neither appraisers nor stock analysts control the actions of individual buyers and sellers, which is why there is a distinction between price and value. The stock analyst could be wrong, but so can we. To suggest that the step-by-step SOW of the appraisal model invalidates us from being wrong, yet a stock analyst very well could be is without merit.

 

[J Grant]

There's a reason why none of the commercial appraisers that have participated in this thread or the other one on predictions have denied its predictions. When you do an income approach, you are forecasting future cash flows. Maybe it is assuming that the future will be relatively stable with just one year worth of income analysis shown, or maybe it is a long term cash flow forecast. Same with a residential income approach. The monthly rent that you enter in that field isn't from 5 years ago, it is forward looking, even if it is just looking forward to the upcoming month.

You say, well that's a forecast, not a prediction, right? I looked up synonyms for prediction on Google:
pre·dic·tion
prəˈdikSH(ə)n/
noun

1. a thing predicted; a forecast.
   "a prediction that the Greeks would destroy the Persian empire"
   synonyms: forecast, prophecy, prognosis, prognostication, augury; More

How could you do an income approach without forecasts/ predictions and comply with USPAP?

Greg, yes, an income approach can be based on predictions of future earnings /forecasting cash flows. However, the income approach is used to arrive at TODAY'S (eff date) value . Because an investor relying on the projected income approach still has to pay TODAY"S effective date price to buy the property today to get the foretasted income, correct ?

Therefore, even though forecasting, or predicting an income is part of the analysis, the result of it, the income approach value indicator, is an opinion of value as of X effective date. Then it is , reconciled with other approaches to produce your opinion of market value as of X effective date.

I never denied that appraisers could not use forecasting or predictive outcomes as part of their SOW, however, the as of effective date market value opinion is still an opinion, not a prediction.

That is especially true for protection for commercial appraiser because the downside or predictive analysis is it can be wrong. Such as investor relied on a 10 year future earnings of a mall he paid 40 million 10 years ago Now the mall is half empty due to Amazon /internet shopping and bleeding money. The appraiser provided an opinion of value based in part of predictive earnings 10 years out for the mall and the predictive aspect turned out to be wrong.