RIP AQB and ASC, to be replaced with "Federal Valuation Agency"

[Sadie]

It depends, I have heard appraisers here say we should not use the best available market data because they don't think our peers are doing that. Seems faulty to me.

Most of the appraisers on this forum say they use the best available market data. I don't remember anyone saying they didn't. Admittedly I don't read all the posts. And I say to any of the appraisers who are not using the best available market data-Stop it.

 

[George Hatch]

It depends, I have heard appraisers here say we should not use the best available market data because they don't think our peers are doing that. Seems faulty to me.

If you're referring to the thread about retrospective value appraisals that isn't what we said. At all.

 

[RCA]

I would say they should not be "deciding" such things - they should be extracting and supporting them from data and analysis.

The problem is, from someone who has good experience at this, is that the data is not good enough.

You would think appraisal organizations would be working with MLS's and other data providers throughout the country to make necessary changes so that residential appraisers could indeed objectively appraise based on data.

But they are pretty much useless to do anything but create more stupid regulations or make minute changes to existing ones, year after year.

FNMA, Freddie Mac, et al, are just as useless.

What is missing for example:

1. For purchases, there is invariably an appraisal with a Cost Approach and Effective Age. That effective age should be entered in the MLS data. And as inaccurate as it may be, it is definitely better than saying a 120 year old home is 120 years - which is what happens if you are running regression on 100 plus properties, - unless you take the time to look at the MLS photos on all 100+ properties and judge effective age yourself. And, quite frankly no one is willing to pay for that.

2. Actual Age is often inaccurate when there have been major additions to homes. The actual age should be a GLA (or as the case may be GBA) weighted value based on the year of construction..

3. Unfinished and basement areas are often inaccurate.

There should be an ongoing project to correct all sales data going back at least 3 years. Corrective data could be put into a separate database, keyed with the same MLS and parcel numbers.

FNMA, Freddie Mac and the VA and other appraisal organizations should pay for these corrections, since they have so far failed in their implicit responsibility to manage these things over the past decades.

 

[Sadie]

One of my problems with Park's statement, is who then makes the decision regarding comparables, adjustments, etc? DWiley may not think that removing the appraiser's discretion from comparable choice and adjustments is a USPAP violation, but it may be a violation in what replaces the appraiser's discretion. I think it violates the Ethics rule regarding appraiser independence. Tell me how it doesn't?

 

[shrubberyvaluation]

If you're referring to the thread about retrospective value appraisals that isn't what we said. At all.

It might not of been what you said, but others did. Such comments by others as putting blinders on. If you don't think data is relevant,then don't use it, but pretending its not there is not correct.

 

[George Hatch]

No it isn't what they were saying. They were saying to limit the data they're using to what was known/knowable to the market participants at the time and to exclude data they wouldn't have had access to due to those transactions occurring after the fact.

Yes, you CAN use more current data without running into a violation, but for the property types you appraise there isn't going to be any reason to do that. You appraise a property type where data availability generally isn't an issue. If you were doing specialty property types like marinas and oil refineries and ranches where your datasets were tiny then data availability would be a problem and you would use whatever you could get your hands on. But for an SFR assignment involving a retrospective date 6 months ago? Data availability won't be your problem - you'd just use the same data you'd use if you were working on that assignment in real time on that date.

If you were doing the assignment 6 months ago and your eff date was the date you inspected then what data would you be using? Data that closed a week after you inspected? Usually not. Not unless there are some extraordinary circumstances afoot. You might normally include properties that are listed or pending, which *status* would also be fair game as of your effective date.

 

[CGinMN]

I would say they should not be "deciding" such things - they should be extracting and supporting them from data and analysis.

Suppose an appraisal report has multiple pages demonstrating, with data, that home prices were increasing 9% per year over the time period covered by the comps. But then the appraiser "decided" to use only 3% as the adjustment, and stated right in the report that was done to be conservative. Is that discretion?

Should appraisers keep "deciding" to adjust at $35-$40/SF for years and years, even when data in the area objectively shows that the adjustment should be far more than that?

Is it acceptable for an appraiser to decide to apply market condition adjustments to purchase appraisals but then not apply them for refinance appraisals of very similar homes in the same neighborhood?

How much "discretion" should appraisers have in the above situations??

I decide adjustment rates all the time. Depreciated cost indicates X, sensitivity indicates Y, regression indicates Z. Now, if the opinions don't match the analysis, that is a different problem, and the solution to that IMO is not to strip discretion from good appraisers, but rather incentive quality reporting, and de-incentivize junk reporting. This is a topic that has been brought up many times here... nobody can figure out a way to incentivize quality outcomes. It really wouldn't be that hard.

 

[George Hatch]

They're trying to limit the application of subjectivity, particularly with regards to property attributes including location. They're not talking about cap rates and income multipliers and such.

Supported vs unsupported PFA.

 

[George Hatch]

I think using the "limit discretion" triggers appraisers because it implies an arbitrary infringement on their impartiality and objectivity. I think "limit subjectivity" relates more directly to what they're really talking about because it's antonym is "objectivity" which is what we normally aspire to. We all want to do more objectivity and less subjectivity whenever we can, right?

Go back to what the complaints are: that appraisers are allegedly allowing their personal biases (which is not a legitimate form of "discretion" in our business) to influence their comp selection and analyses. I tell brokers and borrowers all the time that they're welcome to send me any and all data they want me to consider, and that I will consider them in my analysis. But I also tell them that regardless of what they send me, I will be exercising my own discretion as to what I consider to be the most relevant and comparable data 'cause it's my appraisal.

 

[shrubberyvaluation]

I think using the "limit discretion" triggers appraisers because it implies an arbitrary infringement on their impartiality and objectivity. I think "limit subjectivity" relates more directly to what they're really talking about because it's antonym is "objectivity" which is what we normally aspire to. We all want to do more objectivity and less subjectivity whenever we can, right?

Go back to what the complaints are: that appraisers are allegedly allowing their personal biases (which is not a legitimate form of "discretion" in our business) to influence their comp selection and analyses. I tell brokers and borrowers all the time that they're welcome to send me any and all data they want me to consider, and that I will consider them in my analysis. But I also tell them that regardless of what they send me, I will be exercising my own discretion as to what I consider to be the most relevant and comparable data 'cause it's my appraisal.

The complaint from the most popular case in Marin City seems to be based on claiming the appraiser is not using other market areas because of their demographics. Do you think federal regulators should tell you that you have to use comps from Mill Valley or something?