USPAP 2006 Online

[Fred]

Denis,
On the other hand, nine pages (depending on font) sounds like reasonable effort at straightening out the mess of language (pages 4-6) that is attached to the new Fannie “form” (pages 1-3). That is why I posted here many times, that after you get the lender-client to state the identify of other intended users, if Fannie is not on the list, you ought to replace pages 4-6 (for starters) with something more appropriate.

Steven,
Since value is not a fact fact, how would one measue its accuracy?
JC

That raises some interesting thoughts. Perhaps, the AF could promote public trust by advertising that appraisers cannot measure the accuracy of appraisals. :icon_smile:

In USPAP per se, there is no way to measure accuracy and, more importantly to me, no imperative to be accurate. For example, the SR’s tell us to use sales that are “available” in order “to indicate a conclusion.” Yes, that’s “a” conclusion - any old conclusion. That’s why most large client groups have their own supplemental standards. I believe the “comp check” is one of the few institutionally requested assignments that doesn’t come with supplemental standards.

In those assignments where supplemental standards cause the appraiser to certify to having accuracy - and that work would include work that appears on the new 1004 form, which says “accurate appraisal” right on top - accuracy and crediblity become the same thing. In any case, measure accuracy the same way you measured it in assignments where you certified to having accuracy.

 

[Austin]

Value Is A Fact Is You Define It Correctly

One of my problems with the present appraisal model is that there is no definition of what accuracy means. In my view, there is such a definition and value can be as accurate as any other observable and measurable occurance.
If you define the purpose of appraising as the science of finding the math equation that explains the correlation between value influencing factors and value, then the result can be as factual and accurate as need be. If the model test the equation by predicting the comparable sale prices used to derive the equation and it makes the predictions with a high degree of accurracy, what more accuracy and credible result can you expect? If the probability test statistics say the result has a 1 in 20,000 chance of being wrong, that is better odds than not getting run over by a car or something.
After debating this for many years, it seems that some appraisers have a vested interest in keep appraisal results in the realm of a devination to avoid any standard or accountability that would force them to learn something about statistics and give up their voodoo quantitive model that allows them to devine any answer their heart desires.

 

[Fred]

Austin,
Other than your statement, "the present appraisal model" - because I had no idea there was only one - I agree. Accuracy, especially relative accuracy, is quite measurable. However, you know the "it's an art" arguments will come running out of the woodwork.

I have never been able to square the cross currents. On one wave, it's just an opinion and accuracy is immeasurable, but when the tide goes the other way AVM's are garbage and Skippy is a menace.

 

[John SRA]

Steven,

I did not say that accuracy could not be measured, I merely asked for your opinion on the best way to measure it.

Any measurement of accuracy must account for the scope of work, or it is meaningless. These are the two worlds I cannot reconcile. Those who claim that there is an absolute value that can be measured, but still support the notion that there are varying degrees of solutions that might be appropriate for different problems.

Those who certify the accurcy of appraisals on Fannie Mae forms do so in the context of the scope of work. If an appraiser performs an assignment in complete accord with all applicable standards, rules, supplemental standards, etc., but the scope of work does not reveal the five barrels of nulclear waste that were buried on the site 5 years ago (for which the clean up costs exceed the final value opinion), is the value "accurate"?

The fact that different scopes of work might result in varying degrees of accuracy does not diminish the professionalism of appraising. Doctors, accountants, engineers all have the same concept.

Have a good day

JC

 

[Steve Owen]

Price is a fact... value is a judgement!

Steven,

Since value is not a fact fact, how would one measue its accuracy?

JC

Because value is a judgement, all of the items in your last post are accurate.

The fact that different scopes of work might result in varying degrees of accuracy does not diminish the professionalism of appraising. Doctors, accountants, engineers all have the same concept.

Hear! Hear! (Or har! har!).

When you buy a new house, you know the price you paid. That is a fact, but what is the value? Value means different things to different people... to some the swimming pool in the back yard adds almost immeasurable value, while to others it is just a nuisance to be taken care of. Value must be measured in the minds of various players and compared to prices of other similar items. That is why our definition of market value includes the language "most probable."

I had an interesting conversation with a potential client the other day. I asked what are you going to use the property for? She said, what does that have to do with its value? I went on to explain in simple terms, highest and best use concepts. The property in question is along a hot retail strip... highest and best use of the land is undoubtedly retail. However, two retail establishments in a row have failed in short order... probably because of inadequate parking and drive entrance. The potential client's use is for office space, which is actually, most likely, the highest and best use for the improved property. Still, if someone could figure out a way to make the property retail (like getting the next door neighbor to take down the barricades onto their parking) then the improved property would be worth more.

Value... it is a judgement (or a set of judgements) and appraising is an art.

 

[Fred]

John,
As you point out, one way is to review the process. Another way is to test the results. Austin mentioned one way to do that and the IAAO has covered a lot of that ground.

The fact that different scopes of work might result in varying degrees of accuracy does not diminish the professionalism of appraising. Doctors, accountants, engineers all have the same concept.

The concept is part of human endeavor. However, none of those other professions take the elastic clause approach to it that USPAP does. No imperative to create a quality work product, and no scope exceptions needed to avoid due diligence - I'd have to see it to believe it.

Steve O.
You are right. It does create a lot of confusion when one starts playing around with the “value” semantics that have built up over centuries. Modern economists have found that it is more efficient to analyze market activity in terms of price. That is, we can analyze for most probable price without using the word “value” and without sliding down that slippery slope of semantics.

In fact, now that I think of it, I am paraphrasing the guy who came up with “most probable price.”

 

[The Warrior Monk]

After debating this for many years, it seems that some appraisers have a vested interest in keep appraisal results in the realm of a devination to avoid any standard or accountability that would force them to learn something about statistics and give up their voodoo quantitive model that allows them to devine any answer their heart desires.

:icon_smile:

I'd love to tell the lender my value is $X,zzz,zzz +/- 100%!

 

[hastalavista]

Steven,

I did not say that accuracy could not be measured, I merely asked for your opinion on the best way to measure it.

Those who certify the accuracy of appraisals on Fannie Mae forms do so in the context of the scope of work. If an appraiser performs an assignment in complete accord with all applicable standards, rules, supplemental standards, etc., but the scope of work does not reveal the five barrels of nulclear waste that were buried on the site 5 years ago (for which the clean up costs exceed the final value opinion), is the value "accurate"?

I've never interpreted "accuracy", "reliability" or "credibility" to be measured in terms of the absolute precision of the value opinion. I interpret it to be in the the context of the appraisal process (SOW). If the process is completed properly, then the resulting value is supported. The value could be accurate or inaccurate- but the process on which the value was concluded (opined) is accurate, reliable and credible.

If a review of an appraisal is a method to test its "accuracy", SR-3 directs the reviewer to check for completeness of the material in the original report, the adequacy and relevance of the data used, and to develop an opinion of the appropriateness of the methods and techniques given the scope of work. Assuming the report is reasonably complete, the data is adequate & appropriate, and the appropriate methods were used, then the remaining question is, "within that context, is the conclusion reasonable and appropriate?" (My quotes)

But I also do not subscribe to the "absolute/one and only one" value theory.

 

[Fred]

Denis,
It should be obvious to most that one of the most common debate tactics (among those who debate tactically) is to take what someone stated as a principle, exaggerate that into to some absurd absolute statement of scientific law, and then argue against the absurd, absolute statement. I am positive that no one who posted in this thread believe is a so-called “absolute” right value. Somewhere between that and the other absurd extreme, it is possible to draw some lines for numbers that fall outside the ambit of "most probable."

 

[George Hatch]

Here's the problem with the semantics of "accurate" in appraisals: that term speaks to the opinion to be developed rather than the facts and methodology used to develop it.

Putting a requirement in USPAP for appraisers to develop "accurate" results can do nothing to obtain more reliable results except to create a moving target that no appraiser could even be confident in hitting -regardless of how their appraisal process is chosen or defined. "Accurate" in terms of an opinion of value is a term that lies within the eye of the beholder and can neither be proven nor disproven on an objective basis. It would not be an enforceable requirement, except to the extent that we would care to encourage the "I know a bad appraisal when I see one" crowd. I can't imagine anyone here would want that.

We already have requirements for using facts that are true and correct, and for using correct methodology. Whether by Departure Rule or SOWR, we also have requirements to use sufficient diligence in the development of the workproduct to fit the needs dictated by the use/user.

The predominant orientation under the DR as well as the SOWR is that an appraiser who is using a reasonable development process, being truthful about the data they're using and is using acceptable methodology to analyze that data will produce workproduct results that are reasonable, reliable and credible within the context of that assignment.

I don't think the requirements under the SOWR are nearly as "elastic" as Steven portrays them to be. My experience with reviews is that in 95% of all problem appraisals, it is the appraiser's handling of the facts that create or enable the problem. Errors of omission and/or commission about the subject property and/or the comparable data used to develop the different approaches to value. I'd attribute the other 5% to a mix of methodology and competency.

Now an argument can be made that the flexibility appraisers have in choosing an appropriate and reasonable SOW can be abused, but that problem precedes the SOWR, and the Departure Rule, and USPAP itself. Appraisers have always been able to underanalyze an appraisal problem to one extent or another by shortsheeting the development process. Regardless of the mechanism used to determine how much development to use there have always been requirements to produce a workproduct that is meaningful and not misleading. In addition, true facts and reasonable methodology have also always been required.

There are enough areas of overlap in USPAP on the subject of diligence that I'm not at all worried about coming up short on coverage.