USPAP Definitions

[RCA]

Time for me to get my license renewed at $640 every two years. So, I kind of enjoy this. I'm familiar with USPAP by now. And of course, they are always coming out with updates, which are interesting in and of themselves.

But I also enjoy going over the latest definitions and seeing how much things have improved or not.

Someone should really make a list of the nonsense in USPAP.

"COST: the amount to create, produce or obtain a property. COMMENT: Cost is either a fact or an estimate of fact."

My comment: Fact is by definition something in the past. Whatever happened to those commercial appraisals LOADED with DCFs, predicted futures costs and revenue?

"CREDIBLE: worthy of belief. Comment: Credible assignment results require support, by relevant evidence and logic, to the degree necessary for the intended use."

My comment: So if I create an Excel spreadsheet of past property sales and tax assessor data that supports my concluded opinion of value, then it is credible, even though it may be based on inaccurate tax assessor data? It MAY be that this is the intended meaning of this word. But USPAP should also state that CREDIBLE opinions are not necessarily based on the truth. There is therefore only a shallow meaning to this term, that is fundamental to the shallowness of many value opinions. They only dig so far into reality and then stop, because they are by definition CREDIBLE, they are accepted as TRUE.

"PRICE: the amount asked, offered or paid for a property."

My comment: This is an interesting one. PRICE can only be a past event. You therefore cannot predict future sale prices, so I presume that the only thing you can predict in this category are market values. How inconvenient. - It's not going to happen. People will use the term "PRICE" as they see fit; they will make it whatever they want by developing the necessary context. As an appraiser, someone comes to me to give my best opinion, based on statistical analysis, of what some property that is currently up for sale is going to sell for. I am going to predict the Sale Price, with a given marketing time. Not market value, SALE PRICE. Is this an appraisal or not? [NOTE: You most likely have to go through the intermediate step of forming an opinion of the market value, in order to predict the sale price. .... ]

... and so on ....

 

[Mike Kennedy]

Puff the Magic Dragon was credible.

 

[Raven59]

Time for me to get my license renewed at $640 every two years. So, I kind of enjoy this. I'm familiar with USPAP by now. And of course, they are always coming out with updates, which are interesting in and of themselves.

But I also enjoy going over the latest definitions and seeing how much things have improved or not.

Someone should really make a list of the nonsense in USPAP.

"COST: the amount to create, produce or obtain a property. COMMENT: Cost is either a fact or an estimate of fact."

My comment: Fact is by definition something in the past. Whatever happened to those commercial appraisals LOADED with DCFs, predicted futures costs and revenue?

"CREDIBLE: worthy of belief. Comment: Credible assignment results require support, by relevant evidence and logic, to the degree necessary for the intended use."

My comment: So if I create an Excel spreadsheet of past property sales and tax assessor data that supports my concluded opinion of value, then it is credible, even though it may be based on inaccurate tax assessor data? It MAY be that this is the intended meaning of this word. But USPAP should also state that CREDIBLE opinions are not necessarily based on the truth. There is therefore only a shallow meaning to this term, that is fundamental to the shallowness of many value opinions. They only dig so far into reality and then stop, because they are by definition CREDIBLE, they are accepted as TRUE.

"PRICE: the amount asked, offered or paid for a property."

My comment: This is an interesting one. PRICE can only be a past event. You therefore cannot predict future sale prices, so I presume that the only thing you can predict in this category are market values. How inconvenient. - It's not going to happen. People will use the term "PRICE" as they see fit; they will make it whatever they want by developing the necessary context. As an appraiser, someone comes to me to give my best opinion, based on statistical analysis, of what some property that is currently up for sale is going to sell for. I am going to predict the Sale Price, with a given marketing time. Not market value, SALE PRICE. Is this an appraisal or not? [NOTE: You most likely have to go through the intermediate step of forming an opinion of the market value, in order to predict the sale price. .... ]

... and so on ....

If you correct everything there will be no reason for another revision. Your suggestions will happen in the 2020-2021 version.

 

[George Hatch]

Uhhh, not to be a poo-poo head, but I hope you haven't been struggling with this question for any length of time. Not when the answer to your question is actually part of the question itself:


"COST: the amount to create, produce or obtain a property. COMMENT: Cost is either a fact or an estimate of fact."

What is a forecast if not an estimate?

 

[RCA]

Uhhh, not to be a poo-poo head, but I hope you haven't been struggling with this question for any length of time. Not when the answer to your question is actually part of the question itself:


"COST: the amount to create, produce or obtain a property. COMMENT: Cost is either a fact or an estimate of fact."

What is a forecast if not an estimate?

It says an "estimate of fact." In other words, an estimate of a past event. A forecast is a prediction of a future event.

I was going to add that I bet most appraisers on this forum could come up with a better definition of, say, COST, that works.

....


Here is my rough definition: COST: The amount of assets a legal entity has either actually sacrificed or, predicted or presumed will need to sacrifice in order to acquire a given asset or service. This sacrifice could be a past, present or future transaction, hypothetical, predicted, presumed, or actual.

COMMENT 1: It is presumed that an accounting has occurred of the transaction that affects the balance sheet of the given entity and that the assets sacrificed will balance with the assets added to the ledger as a result of the transaction. This works for all instances I can think of.

COMMENT 2: If the transaction has occurred through a trade, then the asset sacrificed is maintained on the books at a certain value and the value of the sacrifice would likely be the book value. Although, as is often the case, the book value may not be regarded as reflective of market value, and entries could be made to adjust the cost via an adjustment for appreciation/depreciation at the time of trade.

COMMENT 3: Understand, it may be the case that the given legal entity doesn't actually record such transactions on accounts, as in the case of an individual who is simply buying a property and doesn't own a business or keep accounting records, in which case the COST would have to be derived most likely via market value. Yet, the concept is the same: The given legal entity has to sacrifice something to obtain something else, past, present or future. The value of that thing sacrificed or to be sacrificed, is the cost.

 

[DWiley]

If you have suggestions then you would be better served sending comments to the ASB, rather than just posting them here.

Good luck on “credible.” Check the definition of that term in Black’s.

 

[Mike Kennedy]

If you have suggestions then you would be better served sending comments to the ASB, rather than just posting them here.

Good luck on “credible.” Check the definition of that term in Black’s.

<a href="https://thelawdictionary.org/credible/" title="CREDIBLE">CREDIBLE</a>

 

[J Grant]

Bert-My comment: This is an interesting one. PRICE can only be a past event. You therefore cannot predict future sale prices, so I presume that the only thing you can predict in this category are market values. How inconvenient. - It's not going to happen. People will use the term "PRICE" as they see fit; they will make it whatever they want by developing the necessary context. As an appraiser, someone comes to me to give my best opinion, based on statistical analysis, of what some property that is currently up for sale is going to sell for. I am going to predict the Sale Price, with a given marketing time. Not market value, SALE PRICE. Is this an appraisal or not? [NOTE: You most likely have to go through the intermediate step of forming an opinion of the market value, in order to predict the sale price. .... ]

Appraisers do not predict a sale price/ future price ( unless it is the assignment purpose such as in a relo appraisal). The subject gives an opinion of market value, at it's most probable price equivalent per the market value definition used. Read what the statement where you give your market value opinion as of the effective date. We are not expected to predict an actual do the dollar price in the real world market ( unless that is specified in the report as purpose of report )

Prediction a sale price can be an appraial but then don't be misleading about what you are doing. Report statement would read " Purpose of appraisal: prediction of a sale price" . It would not read, "purpose of appraisal, opinion of market value", .

 

[DWiley]

This is an interesting one. PRICE can only be a past event. .

I hope no one shares that sentiment with the ERC.

 

[J Grant]

I hope no one shares that sentiment with the ERC.

Hi Danny i did not write that, but maybe you just highlighted it with my name? Note in my post first paragraph starts out with the name Bert: to attribute the paragraph to him, I copied the paragraph from his post which started the thread.

Indeed price can not only be a past event...prices are past, present, and future events in the market. However, value is based in large part on past prices ( and their adjusted value equivalents ) in all kinds of appraisals not just RE appraisals !