TAF and USPAP - great analysis

[Dublin ohio]

It seems we have two visions here
If you build it they will comevsIf they want it we can build it

The "better mousetrap fallacy".

 

[George Hatch]

In terms of methods and techniques, there is room for improvement and there are appraisers and others who are interested in developing those improvements. These improvements aren't going to evolve on their own - someone has to make the effort to do it and we need those people.

So maybe there's a 3rd market reaction cliche in there:

If none of us ever builds it, they CAN'T buy it.

 

[Fernando]

Office real estate in Tokyo at one time, long, long ago (1989), sold for $139,000/sf. This led to estimates that the Imperial Palace was valued at $5.1 trillion - more than the GDP of Japan at the time.

How much was the Japanese Imperial Palace worth? - Blog - Amaral Lab

amaral.northwestern.edu

Imperial Palace is unique surrounded by urban environment.
In Asia where there are many condos for sale, $/sf would make more sense.
Here. land value varies so much not by size but topography, useability, and views.
In your hometown in conforming tract, lot size more or less similar thus you can use $/sf.
However in Manor district where topography changes, lot value changes. On one street I remember a comp home on slightly sloped terrain and that lot had great views of ocean. Wished I bought that home for investment.

 

[RCA]

Fannie/Freddie are talking tough about rejecting appraisals that don't include consideration of market conditions adjustments and sales concession adjustments. If they hold the line and start cutting appraisers off for not meeting the requirements of these assignments then perhaps as many as 10% of the slackers will get cut off for refusing to cooperate and the other 90% of slackers will repent and clean up their act. In lieu of getting cut off.

If Fannie/Freddie DON'T follow through and they DON'T enforce their requirements then most of the slackers will keep on slacking. Human nature. The Principle of Substitution doesn't just apply on the buyer's side; it also applies on the seller's side. So to speak.

Oh good grief, that is not saying much. Just a little stinky little thing, easy to do. You must notice there is no rigorous definition, nothing close, as to how to calculate the impact of market conditions. I would guess a simple linear regression will make them happy, in most cases. The problem is that the best linear regression, especially if not done correctly, can be way off. And even if you have the best linear regression, it could still be way off. They don't provide any kind of criteria. Well, of course, we all know that is better than them trying to write some precise protocol, that they most likely would totally screw up. They lack the competence to do a good job.

- And it is not just a lack of statistical savvy, you have to combine that with a good understanding of market differences - and figure out a way to let competent appraisers do what they need to do and prevent incompetent appraisers from going sideways.

Based on the inside comments of Fannie Mae employees about their own company, they will never figure these things out, - probably not in another 20 years even. Well, maybe with AI, they can get it figured out. Yea, bet that is what is going to happen. Deep learning AI will figure out some good protocols for them, and also monitor and review reports quickly, efficiently and correctly. Except in the back of your mind, knowing they are all uptight about job security and increasing the size of their human bureaucracy, - it may never happen.

 

[DWiley]

Do you seriously believe using paired sales is going to cut it when you’re appraising multi million dollar properties? Maybe in some cookie cutter condo project.

Please point out the post where I made any reference to paired sales (or any other specific technique).

When I look at reports performed near the same time but with a 50% difference in value conclusion for the same property (which I have done numerous times over the past 15 years), the most common finding is that one of the appraisers ignored the most similar comparables sales, choosing instead to use the sales that are very dissimilar and then failing to adjust for differences in location, quality, condition, etc. in an appropriate manner.

If one is appraising an older, non-renovated home, then it is easy to jack the value up by choosing nearby renovated homes and ignoring the fact that they need quality and condition adjustments. That is a problem in executing the methodology, not a fault of the methodology itself.

 

[George Hatch]

Please point out the post where I made any reference to paired sales (or any other specific technique).

When I look at reports performed near the same time bit with a 50% difference in value conclusion for the same property (which I have done numerous times over the past 15 years), the most common finding is that one of the appraisers ignored the most similar comparables sales, choosing instead to use the sales that are very dissimilar and then failing to adjust for differences in location, quality, condition, etc. in an appropriate manner.

If one is appraising an older, non-renovated home, then it is easy to jack the value up by choosing nearby renovated homes and ignoring the fact that they need quality and condition adjustments. That is a problem in executing the methodology, not a fault of the methodology itself.

I call that the Big Lie. The significant untruth upon which the unreasonable value conclusion is based. It's almost always a deliberate untruth, too.

 

[TerryRohrer]

I call that the Big Lie. The significant untruth upon which the unreasonable value conclusion is based. It's almost always a deliberate untruth, too.

I don't believe it is attributable to a lack of education or training, either.

 

[George Hatch]

Damn straight. The Big Lie is primarily a violation of the ETHICS RULE, for which no amount of academic education or QE training can cure.

 

[Joe Flacco]

What is the "most similar"?

 

[Joe Flacco]

The only time I am aware of a 50% difference in value for a property I appraised is when I appraised a property for $12-13m and the other appraisal was like $5-6m.

The difference was not related to ethics. It was related to competence.