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Rhetorically Asking - the Logic of Scope

Does Providing Only One Comp Violate Scope of Work?

  • Yes, Our peers always provide 3 or more

    Votes: 0 0.0%
  • No, USPAP does not specify how many comps are required

    Votes: 12 100.0%

  • Total voters
    12

George Hatch

Elite Member
Gold Supporting Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
California
Inflexible rules stifle innovation. And innovation won't be accepted or even applied marginally so long as USPAP isn't prescient enough to change to allow that. I recall an early class where the instructor said that they used to use the Historical method of value (i.e.- a 4th approach that adjusted the previous sale price up by a time adjustment only) until USPAP didn't allow it. And I belief Ratliff or Babcock used 7 approaches to value and basically thought everything had to be translated into an income approach.
With the electronic age, we are able to understand less and less of our world. So this specialized knowledge continues to be buried further and further into the bowels of an office full of quants. Tax preparers used to use tables to calculate income taxes. Today the computer does it...I would hate to see the work of a tax preparer who tried to do the form 1040 for a semi-complex return. As with our appraisals, they are far more detailed and complex than when I started and 10x that of the 1950s era. But is that complexity necessary? Or simply an outgrowth of scope creep possible because the technology can do it whereas we couldn't have done an appraisal in 1950 on a typewriter anywhere equivalent to that possible with software.

The reason I never went back to the oil patch was that within 5 years the technology has advanced so far, I was completely out of the loop. Computers wrote the things I did with a LeRoy lettering set and ink. Analog chart recorders were replaced with computer generated logs. I barely recognized the instrumentation when I went back for a few jobs 10 years after I had left the industry. I was obsolete. And the skill set I had is completely ignored today. A friend who stayed in the biz told me recently that he had a wellsite geologist on a well in N. Texas who was completely worthless, had no clue as to what he was seeing and was only familiar with horizontal drilling which consists of mostly drilling in a shale zone. He couldn't pick the top of formations that were a piece of cake. Didn't really understand a well being vertically drilled and missed the pay zone, which they only detected on the electric logs. Apparently his gas detectors were not even working.

I keep saying it and you keep ignoring it. There's nothing in USPAP that prohibits appraisers from adding a 4th approach to value. There is no upper limit to the SOWR. The SOWR only refers to the minimums of a SOW decision.
 

Terrel L. Shields

Thread Starter
Elite Member
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Joined
May 2, 2002
Professional Status
Certified General Appraiser
State
Arkansas
There's nothing in USPAP that prohibits appraisers from adding a 4th approach to value.
It is no longer considered what your "peers" do, nor commonly mentioned in any modern text. Therefore, doing it is a nothing burger. And USPAP discusses 3 approaches explicitly. You could never use such an approach as a single method of valuation. I see it all the time in the state sanctions. They argue that this approach or that was not done properly. Do you really think they would approve of weighting such an approach? OTOH, you might simply suggest a recent sale of some property was considered and given weight and USPAP is cool with that. SOW isn't a "bye", it is a minefield.
 

Carnivore

Elite Member
Supporting Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
North Carolina
IMO that so-called qualitative (only) method doesn't work very well until at least 5 comps. I read somewhere once that the average 1st time homebuyer looks at - to one degree or another - 50 potential alternatives before they submit an offer that gets accepted. I dunno about the accuracy of that number, but I'd be very surprised if the real average was less than 5 or 6.

I use sensitivity analysis a lot, but that model works better with more sales, too. I think the primary strength of the Fannie 3-comp grid is that you actually can get to a reasonable result with as few as 3 sales. That's good for market segments when you don't have a lot of comparable sales. That's why I don't think Big Data will ever render the 3-comp grid completely obsolete.
Big data is not intuitive nor discerning enough to see the difference, but not only the difference, but being able to understand the layers preceding the change positive/negative. Another problem big data has is being able to see in the future. We do that on a local level. We know when a past event will have an impact on market segments now and in the future. In other words Big Data is always operating to much off of historical data. So can they see a trend? Yes, But do they know why the trend exist? I say No! Its possible they will be able to Correlate the relationship of different data points.

Good data point for Big Data is the Census Tracts. Problem there is that only updates every ten years. So I am not saying never, I am saying not anytime soon.
 

J Grant

Elite Member
Joined
Dec 9, 2003
Professional Status
Certified Residential Appraiser
State
Florida
It is no longer considered what your "peers" do, nor commonly mentioned in any modern text. Therefore, doing it is a nothing burger. And USPAP discusses 3 approaches explicitly. You could never use such an approach as a single method of valuation. I see it all the time in the state sanctions. They argue that this approach or that was not done properly. Do you really think they would approve of weighting such an approach? OTOH, you might simply suggest a recent sale of some property was considered and given weight and USPAP is cool with that. SOW isn't a "bye", it is a minefield.
The 3 approaches are fundamental because they replicate the three fundamental activities in the market for RE - people buying and selling property, people renting /leasing people property, and people building property. )

New and hi tech fail if despite the dazzle, they do not meaningfully solve any of the 3 approaches better than traditional methods. Though fannie thinks its big data solves the value approach well enough to grant an appraisal waiver- BUT with failsafe hedges -, liability on the tax payer, pre screening the borrower and property and getting an inspection or data collection.

Big data can be used to solve different problems apart from the MV opinion , such as it could identify broad past trends or forecast future affect on prices of different interest rates . But since neither is typically the problem to be solved , applying it without a demand is pointless.
 
Last edited:

ucbruin

Elite Member
Joined
Mar 11, 2014
Professional Status
Certified Residential Appraiser
State
Massachusetts
How will big data "verify" sales with participants of the transactions??? :unsure:
 

Carnivore

Elite Member
Supporting Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
North Carolina
Because napkins have been replaced by modern software programs?
When USPAP first came out it was often said by the USPAPIANS "You could use a napkin to report an appraisal" If you think of a Restricted Use Report; its almost just a napkin size report.
 

George Hatch

Elite Member
Gold Supporting Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
California
It is no longer considered what your "peers" do, nor commonly mentioned in any modern text. Therefore, doing it is a nothing burger. And USPAP discusses 3 approaches explicitly. You could never use such an approach as a single method of valuation. I see it all the time in the state sanctions. They argue that this approach or that was not done properly. Do you really think they would approve of weighting such an approach? OTOH, you might simply suggest a recent sale of some property was considered and given weight and USPAP is cool with that. SOW isn't a "bye", it is a minefield.
Ima guess that if you have a strong SCA and a strong Majik Bean, the results of each being strongly supportive of each other - that saying so in an appraisal report probably won't lead to anyone thinking you did the appraisal incompetently.

And for gawd's sake, please stop conflating the technical incompetency of the members with your board with the standards they are misinterpreting. If they were competent with the material they wouldn't be doing dumb things with it. It looks to me like your state has a political problem on its hands. Whatever means they're using to appoint board members and whatever rules they have in place to keep those board members from making things up on the fly isn't serving their constituents very well.
 

Terrel L. Shields

Thread Starter
Elite Member
Gold Supporting Member
Joined
May 2, 2002
Professional Status
Certified General Appraiser
State
Arkansas
How will big data "verify" sales with participants of the transactions??? :unsure:
As Comrade Lenin said, "Quantity has a quality of its own." If big data has all the data it averages out in the long run. No need to confirm, right?
 

ucbruin

Elite Member
Joined
Mar 11, 2014
Professional Status
Certified Residential Appraiser
State
Massachusetts
As Comrade Lenin said, "Quantity has a quality of its own." If big data has all the data it averages out in the long run. No need to confirm, right?
No quarrel from me....

You know I don't interview the participants.... :peace:
 
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