Principle of Substitution, ....

[TerryRohrer]

I would probably rank. It's better than this and inferior to that.

So entirely subjective, without support. Got it!

 

[Mejappz]

So entirely subjective, without support. Got it!

Exactly. Just like the USPAP police like it.

 

[Mejappz]

Making sure the trains run on time is all that matters.

 

[shrubberyvaluation]

The thread is about the legitimacy, and correctness of the Principle of Substitution - and the associated technique of matched pairs. It is about the correctness of the assertions made by AI manuals and courses supporting the Principle of Substitution and matched pair analysis. It must be an important issue - as the AI reportedly spends hundreds of thousands of dollars on lobbyists to promote these concepts and techniques as reliable and legitimate.

Buying decisions occur before appraisals are generated (in most cases). Buyers rarely depend on appraisers to make decisions. - The users you are referring to are mostly banks and lenders - just looking for a rubber stamp, E&O insurance, a fall guy - and an appraisal that will not get them into trouble. -> Per the posts in this forum going back many years.

So your assertion that "users make their decisions based on those appraisals all the time" is really this: Lenders decide to accept appraisals if they meet certain standard requirements, e.g. having the right checkboxes checked or not, the value does not cause a problem for them, the wording does not create red flags for issues such as bias and so on. Fly-by-the-seat adjustments for unmeasured characteristics are generally accepted if they are not too large or small or contradict other things in the report.

Now, clearly, I am not too concerned about what gets accepted by the Lenders or the GSEs - the most common and critical users. Of course, they need the rubber stamps to function. They have moronic processes that the majority just simply work their way through without much if any critical thinking. Again, this forum pretty much supports that point of view.

But suppose you wind up in court with a lawyer intent on ruthlessly undermining your appraisal. How far can he get? I would say, almost all appraisers are skating on thin ice. Even the best.

You are probably not worried. You would just be very bland and state in court that you are just doing things the same as your peers. And you would probably be right. At least in the lower courts, a good show is more important than real substance.

-- So yes you are right that I can't expect a very "robust" discussion on these topics on this forum. But what little discussion is provided is a nonetheless good exercise.

As far as Dell - I have talked with him and been to one of his online classes. They are somewhere between where I am and the members on this forum are - at least last time I checked. Dell agrees it appears that the AI is retarded, although he doesn't say that exactly

... But then, at least as of last summer, - he really isn't into non-parametric statistics or MARS - and for me, that is the starting point for discussion.

There are complaints that have gone through the courts for years that have nothing to do with the credibility of the report. From unrelated books (as it pertains to the appraisal being complained about) over a half century old and complaining about using comps from the same community/neighborhood how well you document everything will matter very little and only after you have been destroyed by public opinion if you are unfortunate enough to be in the firing line. People don't want to hire someone that has been trashed in public opinion as being biased even if you have the best well documented credible report.

 

[Joe Flacco]

Exactly. Just like the USPAP police like it.

If your George Dell methods are so great then why do you whine so much?

 

[RCA]

[shrugs] Someone has to be first. And if you believe you have no peers then I think that's great.

As for me, I have never considered myself to be some sort of thought leader or original thinker in this business, so I've got no dog in that fight. I'm just another lone gunman, toiling away in my mom's basement, same as most appraisers. In my view competent appraisal practice comes down to the fundamentals. Of being first and foremost honest in my handling of the facts and objective as possible in developing my analyses, opinions and conclusions. To finding different ways as may become necessary to apply the underlying principles and concepts to the appraisal problem at hand. I aspire always to write for my users, not for myself.

So far that has served me well. To my knowledge I have never come close to getting sued. But, maybe tomorrow will be different.

Coming from software development, mathematics, and statistics .. puts me in at least a somewhat unique position. Sure, whatever I come up with is PERHAPS not going to be something that many others can do. I have never had a good feeling about the size of the population of appraisers that comes from similar backgrounds. There are certainly appraisers such as those you find in Dell's group that do traditional parametric statistics and R or Python programming. But for some reason, the number willing to go beyond parametric statistics dwindles quite rapidly. Although, some of the latter group seem to have advanced in that area to bayesian statistics, multilinear/curvilinear regression - those latter areas are not really suitable for residential analysis to the degree needed. They won't get you to an R2 of 80% in most cases. You will be down around 40%. WRT to the SF Bay Area.

Software developers who do data mining - are typically very familiar with non-parametric statistics and methods like MARS. And they likely have had something to do with housing statistics, even if only the Boston Data Set from the 70's. But they are not appraisers; i.e. they don't go out and inspect houses and then estimate their value. There are things they not only don't understand but that they really don't understand, nor do they want to spend time learning, - so they fall short as well.

Whether or not you would ever uses these more advanced techniques, you might be curious to understand more about what you do.

I plan to eventually set up extended protocols and code for their implementation. - Not being too concerned about making profit off this venture any time soon. Although, it may have some sideeffects on other ventures that involve inspection, monitoring and valuation. Many things are associated with valuation tasks beyond real estate.

In fact real estate, as you know, is an inertia-laden, slow-moving type of enterprise. If you are out to make fast profits as Venture Capitalists are known for, you will not find real estate interesting in itself. I truly believe that many investors who have an interest in real estate - only have that interest because they see a potential for using the technology in other areas. Some of the potential side enterprises are:

1. Financial Risk
2. Intelligence (gathering and selling)
3. Security
4. Geostatistics
5. Market Prediction
--- and so on.

 

[Joe Flacco]

So entirely subjective, without support. Got it!

That is how market participants make decisions. The three approaches to value mimic market participants' thought processes and behavior. And everyone understands it because it is just common sense. It's great.

 

[Mejappz]

If your George Dell methods are so great then why do you whine so much?

So sad. A few months ago, you asked me to run a data set of multi-million-dollar homes. I said I would if you provided some location information. I even gave you my e-mail never heard back. You’re not interested in learning anything new you rant about things you know nothing about; to each his own. Keep using paired sales. Lol

 

[Joe Flacco]

So sad. A few months ago, you asked me to run a data set of multi-million-dollar homes. I said I would if you provided some location information. I even gave you my e-mail never heard back. You’re not interested in learning anything new you rant about things you know nothing about; to each his own. Keep using paired sales. Lol

I sent it to you and you never replied.

 

[TerryRohrer]

That is how market participants make decisions. The three approaches to value mimic market participants' thought processes and behavior. And everyone understands it because it is just common sense. It's great.

Well, clearly you have a deep understanding! Some contend with markets that require something more than picking the three sales of identical properties that closed yesterday, and have to think about what they are doing.