What's Your Beef About Your Work?

[PS111222333444]

The standard turn time is decreasing with more clients wanting 2-3 weeks where 3-4 weeks used to be the norm.

True Story!!! I feel like I'm short changing something!

 

[leasedfee]

My thoughts mirror Terrel's. Data is like fruit to a grocer. It rots quickly. Unless you're doing lots and lots of fairly homogeneous properties, the expense doesn't seem to match the revenue enhancement -- I wish very much this wasn't the case and wish very much that there was a better repository of collective data (like AI's failed-to-launch national comp database circa 2002). Or that the one national database that we all subscribe to was transparent, consistent, reliable, and robust.

statistics for our adjustments

Do you have 30+ homogeneous random samples to do a valid statistical analysis? Or are you doing nonparametric statistics when the Normal central theorem hypothesis does not work. If not, then it fails to meet the criteria of the normal probability distribution underlying everything taught in statistics 101. Have you ever calculated the Confidence Intervals on a simple or multiple-linear regression analysis? Looking at only the mean/median output is deceptive. For personal kicks, I did a regression model that I threw into church appraisals. The predicted Y (value) might be $1.5 million with a confidence interval of +/- $700,000. Useless. It made the report interesting to this nerdboy, but otherwise meaningless. Much of the articles in TAJ and other social science journals that apply regression analysis have R^2 statistics of well under 40% or worse. It means there was no correlation in the data. Long long ago, before AI started to pimp "statistics" for noobs, I was enthusiastic about such stuff and read intermediate level stats books. Now I see most of what is passed off as "statistics" in appraisal reports as bunk. Usually the appraiser (and sometimes the academic) is clueless and makes numerous violations of statistical principles. Fortunately it hasn't penetrated the profession too much. I guess I've become old school.

 

[Mattinglys Sideburns]

First, this is a very noble initiative you have. I hope that you do publish something from your findings. Stay curious, even when many around you will not.

I will describe a big, overarching problem that I see. It is a heavy contributor in my decision to exit the profession. Please understand these are my experiences and conclusions. I believe they generally apply in the industry, but there are a wide variety of appraisal needs, styles, focus, etc. This is not pointed to any individuals, but rather a bad system. A system that we are somewhat enslaved to.

I'm proud of most of my work over my career (by no means all). My intentions were proper at, well, almost all times. To expand on that, most assignments came with either client feedback or an understanding of the client's interest in obtaining the appraisal. In other words, most work in the profession is done with with something more than a user who has no concern whatsoever for the resulting opinion of value. It is simply human nature to want to please those that hire us. Often we know our clients personally. Without clients, what are we?

The best professionals resist the tendency to lean toward client preferences. Yet the best professionals also are most open to opposing views, criticism, broad amounts of info, etc. So it can be a tricky balance. I don't think I've ever knowingly provided services that were indefensible or inexcusable. But I did not at all times completely follow my own best judgement in producing opinions of value. I think it is close to impossible to make a career in valuation without ever being swayed either consciously or subconsciously by a client's particular interest (Are any industries immune?) I regret not trying a little bit harder.

Still, you balance piousness against losing a big client that supports other appraisers in your company, whose livelihood is partly dependent on this nudging client. Against thinking that the next appraiser they hire will only bend even further.

It is the nature of CRE that opinions of its value can vary widely. There is no right or wrong number. And don't we secretly like it that way? Don't we need it that way?

Commercial appraisers don't really discuss client influence. It's the elephant in the room. I'm setting that poor elephant free. What the hell are we keeping an elephant in a room for anyway? I formally reviewed hundreds of appraisals from probably over 100 firms. I informally reviewed hundreds more. Client influence was almost always a thing, in some way or another. Litigation/contested matters? Laughably a thing. Transactional work? Is it magic that the value falls right in or just above the contract price? Pension fund/institutional awards? Well, are they coming back to you for more?

What about advisory valuation services? When an investor is considering a purchase and would like a valuation expert's opinion on the matter? No, really, I don't know, because this doesn't happen much. We are seldom hired for purposes such as these. We are hired because someone has to have an appraisal, not because they want to purchase our expertise. Users are often already accounting for our biases in their awarding decisions.

We are a commodity, primarily because we have allowed ourselves to be. There is precious little interest in the market for enhanced valuation services. I spent significant amounts of time researching the matter. I created templates for advanced analysis. Then I pitched it and pitched it. The silence was deafening.

Ultimately, an appraisal is usually just a file to fill in some larger process or agenda. Most users do not value our expertise or competency as much as they value our convenience or our flexibility. Ask them off the record. I have. Did I really need to? Yes. I was naive I guess.

Appraisal users do not believe that we are capable of adding value (ironically). Again, how many willing clients are we getting? How much independent, timely, actionable insight have we provided them, ever? How much do we use our expertise to inform of inflated markets? How often do we bother to even lightly address our level of confidence in our assessments? Why not? Is this not of tremendous importance? How often do we challenge BS investor assumptions? Scrutinize our own work? Measure our accuracy? Ask investors to grade our analysis in our reflection of what they are supposedly doing? Are investors really adjusting out sales comps on income properties? Do we do the income approach first or sales comparison first? Why? Not that answer that you give clients, but the real "why". I did ICA first because it guided my analysis of SCA. Hell, something had to. What is the typical price spread on comp sets?

We do our jobs in these ways because clients tell us to. If we did something rogue like provide an opinion of level of confidence or reported appraisal accuracy, users' would call us faster than they could say, "OK Google, find me another appraiser in Walla Walla."

The highest moment of professional shame? The number of times that as a reviewer I suggested a revision to the ICA which came back revised, but with a mysterious adjustment buried in the SCA which happened to push the SCA value back to about the same place as the ICA. The tweaking of values, or worse, for purposes of appearance is ingrained. Conventional dogma of what an opinion of value should look like wags the dog. There's no room for fitting form to analysis. Only the opposite can be accepted - and is ever performed. Again system. But we are a bit meek in self-defense, no?

Appraisers are adding precious little to general industry knowledge. We neglect to adequately inform clients of degrees of risk. Our stated intention is to reflect the market, so we ignore telling the market when it is full of s***. The market knows the market. And they will soon be foolishly buying RE assets yet again, aided by appraisals which reflect current market behavior. How is that valuable information to one with a future interest in the property? Sadly, those with a future interest do not have a face to any of us. Their just some unlucky entity holding the bag at the wrong time.

You see why appraisers are held with such little regard? I don't think we're reviled, just not really ever thought about.

Yes, appraisals are in high demand right now. Are fees increasing? No, clients will settle for lower quality instead. If values would be similar in a $3,000 and $5,000 report (and they would be in a client-influenced environment), which one will they dictate? Strangely, I don't hear valuation professionals question the paradoxical economics of increased appraisal demand but flat or declining revenues. There are probably multiple answers, but are we diminishing the fact that our services just aren't valuable? I do believe we are capable of far more. But we are boxed in at this point. The box is nailed shut in many instances - after we happily climbed right in.

This is systemic. It's a symptom of a society's desire to work a system to maximize their own gains. To the degree that I tried to halt that process or question its veracity, I was dismissed as quickly as the Appraisal Institute dismisses any notions of critical self-analysis. [Kind-of just loving pokes there, no ill-will. Could have substituted AI for "practically every human being ever."]

To summarize, most of the work I've completed over the years, which mattered so much to me, hasn't really mattered. Oh, I kept cashing the checks. Changes don't usually occur when everyone in the game is cashing checks. So, I'm going to see if there is anything else I'm good at that might bring me some fulfillment. I expect a pay cut, in the "near-term" anyway.

Didn't intend to go out scorching earth or anything. Just ended up sharing results of some deep industry and soul-searching. If we can't be honest, what are we as appraisers? We're sort of the police in a dangerous crowd!

I truly respect most of the professionals, especially those in this forum. I have learned a lot here. This is a well-meaning bunch - very well. But I don't see the ability to meaningfully change things within a deeply-rooted system. Nor is there any inclination, from virtually anyone, to do so. Again, my own limited perspective of the world. And please forgive some generalizations made. Trying to convey a broad overall message more so than build a case for a courtroom. No doubt many of you do not have similar experiences to mine, although I believe I am in the majority.

1963jag, contact me if you want to work on any papers, articles, etc. together. I'd be honored to help you. Maybe we have the beginnings of something here...

 

[PL1957]

First, this is a very noble initiative you have. I hope that you do publish something from your findings. Stay curious, even when many around you will not.

I will describe a big, overarching problem that I see. It is a heavy contributor in my decision to exit the profession. Please understand these are my experiences and conclusions. I believe they generally apply in the industry, but there are a wide variety of appraisal needs, styles, focus, etc. This is not pointed to any individuals, but rather a bad system. A system that we are somewhat enslaved to.

I'm proud of most of my work over my career (by no means all). My intentions were proper at, well, almost all times. To expand on that, most assignments came with either client feedback or an understanding of the client's interest in obtaining the appraisal. In other words, most work in the profession is done with with something more than a user who has no concern whatsoever for the resulting opinion of value. It is simply human nature to want to please those that hire us. Often we know our clients personally. Without clients, what are we?

The best professionals resist the tendency to lean toward client preferences. Yet the best professionals also are most open to opposing views, criticism, broad amounts of info, etc. So it can be a tricky balance. I don't think I've ever knowingly provided services that were indefensible or inexcusable. But I did not at all times completely follow my own best judgement in producing opinions of value. I think it is close to impossible to make a career in valuation without ever being swayed either consciously or subconsciously by a client's particular interest (Are any industries immune?) I regret not trying a little bit harder.

Still, you balance piousness against losing a big client that supports other appraisers in your company, whose livelihood is partly dependent on this nudging client. Against thinking that the next appraiser they hire will only bend even further.

It is the nature of CRE that opinions of its value can vary widely. There is no right or wrong number. And don't we secretly like it that way? Don't we need it that way?

Commercial appraisers don't really discuss client influence. It's the elephant in the room. I'm setting that poor elephant free. What the hell are we keeping an elephant in a room for anyway? I formally reviewed hundreds of appraisals from probably over 100 firms. I informally reviewed hundreds more. Client influence was almost always a thing, in some way or another. Litigation/contested matters? Laughably a thing. Transactional work? Is it magic that the value falls right in or just above the contract price? Pension fund/institutional awards? Well, are they coming back to you for more?

What about advisory valuation services? When an investor is considering a purchase and would like a valuation expert's opinion on the matter? No, really, I don't know, because this doesn't happen much. We are seldom hired for purposes such as these. We are hired because someone has to have an appraisal, not because they want to purchase our expertise. Users are often already accounting for our biases in their awarding decisions.

We are a commodity, primarily because we have allowed ourselves to be. There is precious little interest in the market for enhanced valuation services. I spent significant amounts of time researching the matter. I created templates for advanced analysis. Then I pitched it and pitched it. The silence was deafening.

Ultimately, an appraisal is usually just a file to fill in some larger process or agenda. Most users do not value our expertise or competency as much as they value our convenience or our flexibility. Ask them off the record. I have. Did I really need to? Yes. I was naive I guess.

Appraisal users do not believe that we are capable of adding value (ironically). Again, how many willing clients are we getting? How much independent, timely, actionable insight have we provided them, ever? How much do we use our expertise to inform of inflated markets? How often do we bother to even lightly address our level of confidence in our assessments? Why not? Is this not of tremendous importance? How often do we challenge BS investor assumptions? Scrutinize our own work? Measure our accuracy? Ask investors to grade our analysis in our reflection of what they are supposedly doing? Are investors really adjusting out sales comps on income properties? Do we do the income approach first or sales comparison first? Why? Not that answer that you give clients, but the real "why". I did ICA first because it guided my analysis of SCA. Hell, something had to. What is the typical price spread on comp sets?

We do our jobs in these ways because clients tell us to. If we did something rogue like provide an opinion of level of confidence or reported appraisal accuracy, users' would call us faster than they could say, "OK Google, find me another appraiser in Walla Walla."

The highest moment of professional shame? The number of times that as a reviewer I suggested a revision to the ICA which came back revised, but with a mysterious adjustment buried in the SCA which happened to push the SCA value back to about the same place as the ICA. The tweaking of values, or worse, for purposes of appearance is ingrained. Conventional dogma of what an opinion of value should look like wags the dog. There's no room for fitting form to analysis. Only the opposite can be accepted - and is ever performed. Again system. But we are a bit meek in self-defense, no?

Appraisers are adding precious little to general industry knowledge. We neglect to adequately inform clients of degrees of risk. Our stated intention is to reflect the market, so we ignore telling the market when it is full of s***. The market knows the market. And they will soon be foolishly buying RE assets yet again, aided by appraisals which reflect current market behavior. How is that valuable information to one with a future interest in the property? Sadly, those with a future interest do not have a face to any of us. Their just some unlucky entity holding the bag at the wrong time.

You see why appraisers are held with such little regard? I don't think we're reviled, just not really ever thought about.

Yes, appraisals are in high demand right now. Are fees increasing? No, clients will settle for lower quality instead. If values would be similar in a $3,000 and $5,000 report (and they would be in a client-influenced environment), which one will they dictate? Strangely, I don't hear valuation professionals question the paradoxical economics of increased appraisal demand but flat or declining revenues. There are probably multiple answers, but are we diminishing the fact that our services just aren't valuable? I do believe we are capable of far more. But we are boxed in at this point. The box is nailed shut in many instances - after we happily climbed right in.

This is systemic. It's a symptom of a society's desire to work a system to maximize their own gains. To the degree that I tried to halt that process or question its veracity, I was dismissed as quickly as the Appraisal Institute dismisses any notions of critical self-analysis. [Kind-of just loving pokes there, no ill-will. Could have substituted AI for "practically every human being ever."]

To summarize, most of the work I've completed over the years, which mattered so much to me, hasn't really mattered. Oh, I kept cashing the checks. Changes don't usually occur when everyone in the game is cashing checks. So, I'm going to see if there is anything else I'm good at that might bring me some fulfillment. I expect a pay cut, in the "near-term" anyway.

Didn't intend to go out scorching earth or anything. Just ended up sharing results of some deep industry and soul-searching. If we can't be honest, what are we as appraisers? We're sort of the police in a dangerous crowd!

I truly respect most of the professionals, especially those in this forum. I have learned a lot here. This is a well-meaning bunch - very well. But I don't see the ability to meaningfully change things within a deeply-rooted system. Nor is there any inclination, from virtually anyone, to do so. Again, my own limited perspective of the world. And please forgive some generalizations made. Trying to convey a broad overall message more so than build a case for a courtroom. No doubt many of you do not have similar experiences to mine, although I believe I am in the majority.

1963jag, contact me if you want to work on any papers, articles, etc. together. I'd be honored to help you. Maybe we have the beginnings of something here...

Lots of stuff to unpack in this post ... Thanks for taking the time to put your thoughts down.

I guess your primary point is to decry "client influence" in the appraisal process. Obviously, we all have our own experiences and can spend many hours and posts sharing stories of improper client influence. I'm sure lawyers, accountants and even doctors can also share many stories of improper client requests. There are always people looking for improper or illegal advantages.

To me, the sign of a professional isn't avoiding client influence, it's how you deal with it. Personally, I actively seek out client influence. It helps me manage the client's expectations. My clients know that they won't always get what they want, but they also know that I will listen and take their concerns into consideration. I'm sure I've lost clients because of this, but I also think I've earned the respect of my clients as well.

 

[Mattinglys Sideburns]

Oh gosh yes. "Unpack" was the right term!

Now, okay, at the risk of being the forum pariah for my posting length, I have this message. But NY resolution No. 1 is brevity. Thank you PL1957, at least, for getting you some of this mess!

I posted a spontaneous diatribe yesterday. I had no idea yesterday morning that my afternoon would be spent on anything of this sort. So some degree of assessment was in order last night. “Why the hell is Dad so distant tonight? No, even more than usual?”

I stand by almost everything written. But I'd like to retract some misguided content that was perhaps the most important part of the message.

“I don't see the ability to meaningfully change things within a deeply-rooted system. Nor is there any inclination, from virtually anyone, to do so.”

The second sentence lacked thorough research. Further, I should have at least placed the word “visible” in front of “inclination”. It may be that we are not especially vocal or organized about certain issues. But I think there is some degree of desire to improve the systems that involve our valuation services.

And as for the first sentence, that’s just good old-fashioned give-up. Alone, then yeah, that’s probably futile.

But what if 50, 100, or 1,000 of us dropped the mouse and picked up sledgehammers? What if next time certain clients invite you to bid on a job, you state that you would do so, but going forward they should not expect to be able to exert any influence in the direction of our opinions. Happy to listen to concerns? Always. Will we place any more weight on their concerns than those of future note holders, adverse parties, the public at large? Our own conscience? None at all. With no equivocation.

And oh, we’re also cutting out all the report BS, the smoothing, the straw-man data. Deal with it, reviewers. Finally, any concerns we have that are relevant to the value of this asset will be expressed. Ha! Remember when you used to like to censor the report because sometimes stuff “didn’t look good”, or “wasn’t really that relevant”? Whew, ohhhh man… Those days sucked.

Maybe we compose a statement that we provide to all potential users? Something maybe a little less a-hole-ish than terminology suggested herein. What if it was prominent on our website home page? That means lenders, attorneys, AMCs, the Developer Grand Pooba in town (or equivalent title his master prefers)...

There are barely enough appraisers to go around right now. We actually hold the power. Are users going to reject our pledge and a) Look like weasels in the court of public opinion? b) Wait 6 weeks or 9 weeks instead of 3 on an appraisal to close their loan? c) Knowingly employ lower-tier appraisal firms which, in litigation for example, could be a fatal mistake? or d) All of the above.

Those appraisal firms that are afraid to take a stand become suddenly well known, exposed. All who rely on their appraisals will be aware that the appraisal may not be very reliable.

Here’s where the fact that most users are not willing users, but are forced to engage us, is a sweet perk. They have to have us, we are in short supply, and yet they are the influential over us? Are we this submissive?

How bad do you want the system to change? Are we going to submit to the defeatist mindset that “Nobody else will go along so it will just cost me”? Do you expect that conditions will ever improve while sitting silent, or will they just get worse?

How much instant respect do we gain from asserting this stance? Who become the new leaders within our profession, and, also as a profession, within the real estate industry?

Who is throwing flags in the system? Not our job? Is that answer acceptable to you from a system-insider when you purchase or invest in something?

What can I accomplish as an individual when I stand up for what I know is right? Practically nothing compared to what the collective can do. Will we let what we can’t do alone prevent us from doing what we can do together?

Start momentum...Now
Shutting up…Now.

 

[Eli]

First, this is a very noble initiative you have. I hope that you do publish something from your findings. Stay curious, even when many around you will not.

I will describe a big, overarching problem that I see. It is a heavy contributor in my decision to exit the profession. Please understand these are my experiences and conclusions. I believe they generally apply in the industry, but there are a wide variety of appraisal needs, styles, focus, etc. This is not pointed to any individuals, but rather a bad system. A system that we are somewhat enslaved to.

I'm proud of most of my work over my career (by no means all). My intentions were proper at, well, almost all times. To expand on that, most assignments came with either client feedback or an understanding of the client's interest in obtaining the appraisal. In other words, most work in the profession is done with with something more than a user who has no concern whatsoever for the resulting opinion of value. It is simply human nature to want to please those that hire us. Often we know our clients personally. Without clients, what are we?

The best professionals resist the tendency to lean toward client preferences. Yet the best professionals also are most open to opposing views, criticism, broad amounts of info, etc. So it can be a tricky balance. I don't think I've ever knowingly provided services that were indefensible or inexcusable. But I did not at all times completely follow my own best judgement in producing opinions of value. I think it is close to impossible to make a career in valuation without ever being swayed either consciously or subconsciously by a client's particular interest (Are any industries immune?) I regret not trying a little bit harder.

Still, you balance piousness against losing a big client that supports other appraisers in your company, whose livelihood is partly dependent on this nudging client. Against thinking that the next appraiser they hire will only bend even further.

It is the nature of CRE that opinions of its value can vary widely. There is no right or wrong number. And don't we secretly like it that way? Don't we need it that way?

Commercial appraisers don't really discuss client influence. It's the elephant in the room. I'm setting that poor elephant free. What the hell are we keeping an elephant in a room for anyway? I formally reviewed hundreds of appraisals from probably over 100 firms. I informally reviewed hundreds more. Client influence was almost always a thing, in some way or another. Litigation/contested matters? Laughably a thing. Transactional work? Is it magic that the value falls right in or just above the contract price? Pension fund/institutional awards? Well, are they coming back to you for more?

What about advisory valuation services? When an investor is considering a purchase and would like a valuation expert's opinion on the matter? No, really, I don't know, because this doesn't happen much. We are seldom hired for purposes such as these. We are hired because someone has to have an appraisal, not because they want to purchase our expertise. Users are often already accounting for our biases in their awarding decisions.

We are a commodity, primarily because we have allowed ourselves to be. There is precious little interest in the market for enhanced valuation services. I spent significant amounts of time researching the matter. I created templates for advanced analysis. Then I pitched it and pitched it. The silence was deafening.

Ultimately, an appraisal is usually just a file to fill in some larger process or agenda. Most users do not value our expertise or competency as much as they value our convenience or our flexibility. Ask them off the record. I have. Did I really need to? Yes. I was naive I guess.

Appraisal users do not believe that we are capable of adding value (ironically). Again, how many willing clients are we getting? How much independent, timely, actionable insight have we provided them, ever? How much do we use our expertise to inform of inflated markets? How often do we bother to even lightly address our level of confidence in our assessments? Why not? Is this not of tremendous importance? How often do we challenge BS investor assumptions? Scrutinize our own work? Measure our accuracy? Ask investors to grade our analysis in our reflection of what they are supposedly doing? Are investors really adjusting out sales comps on income properties? Do we do the income approach first or sales comparison first? Why? Not that answer that you give clients, but the real "why". I did ICA first because it guided my analysis of SCA. Hell, something had to. What is the typical price spread on comp sets?

We do our jobs in these ways because clients tell us to. If we did something rogue like provide an opinion of level of confidence or reported appraisal accuracy, users' would call us faster than they could say, "OK Google, find me another appraiser in Walla Walla."

The highest moment of professional shame? The number of times that as a reviewer I suggested a revision to the ICA which came back revised, but with a mysterious adjustment buried in the SCA which happened to push the SCA value back to about the same place as the ICA. The tweaking of values, or worse, for purposes of appearance is ingrained. Conventional dogma of what an opinion of value should look like wags the dog. There's no room for fitting form to analysis. Only the opposite can be accepted - and is ever performed. Again system. But we are a bit meek in self-defense, no?

Appraisers are adding precious little to general industry knowledge. We neglect to adequately inform clients of degrees of risk. Our stated intention is to reflect the market, so we ignore telling the market when it is full of s***. The market knows the market. And they will soon be foolishly buying RE assets yet again, aided by appraisals which reflect current market behavior. How is that valuable information to one with a future interest in the property? Sadly, those with a future interest do not have a face to any of us. Their just some unlucky entity holding the bag at the wrong time.

You see why appraisers are held with such little regard? I don't think we're reviled, just not really ever thought about.

Yes, appraisals are in high demand right now. Are fees increasing? No, clients will settle for lower quality instead. If values would be similar in a $3,000 and $5,000 report (and they would be in a client-influenced environment), which one will they dictate? Strangely, I don't hear valuation professionals question the paradoxical economics of increased appraisal demand but flat or declining revenues. There are probably multiple answers, but are we diminishing the fact that our services just aren't valuable? I do believe we are capable of far more. But we are boxed in at this point. The box is nailed shut in many instances - after we happily climbed right in.

This is systemic. It's a symptom of a society's desire to work a system to maximize their own gains. To the degree that I tried to halt that process or question its veracity, I was dismissed as quickly as the Appraisal Institute dismisses any notions of critical self-analysis. [Kind-of just loving pokes there, no ill-will. Could have substituted AI for "practically every human being ever."]

To summarize, most of the work I've completed over the years, which mattered so much to me, hasn't really mattered. Oh, I kept cashing the checks. Changes don't usually occur when everyone in the game is cashing checks. So, I'm going to see if there is anything else I'm good at that might bring me some fulfillment. I expect a pay cut, in the "near-term" anyway.

Didn't intend to go out scorching earth or anything. Just ended up sharing results of some deep industry and soul-searching. If we can't be honest, what are we as appraisers? We're sort of the police in a dangerous crowd!

I truly respect most of the professionals, especially those in this forum. I have learned a lot here. This is a well-meaning bunch - very well. But I don't see the ability to meaningfully change things within a deeply-rooted system. Nor is there any inclination, from virtually anyone, to do so. Again, my own limited perspective of the world. And please forgive some generalizations made. Trying to convey a broad overall message more so than build a case for a courtroom. No doubt many of you do not have similar experiences to mine, although I believe I am in the majority.

1963jag, contact me if you want to work on any papers, articles, etc. together. I'd be honored to help you. Maybe we have the beginnings of something here...

Very nice commentary. I like it.

Imo, it is basically the market structure that is the problem and why things have changed. It is the very reason that anti-trust legislation was written and is on the law books at both the federal and most if not all state levels.

 

[Eli]

The question I have is what is the answer to the market structure problem that would best benefit the public in every way? Consider time and skill and compensation in the answer. Time is a biggie Time may be the biggest biggie out of time, skill, and compensation although they all are very important when focusing on public interest. Independence is too.

Time?
Skill?
Compensation?
Independence?

Those are four good problems to start with for answers to the market structure problem.

 

[Deleted member 126639]

My thoughts mirror Terrel's. Data is like fruit to a grocer. It rots quickly. Unless you're doing lots and lots of fairly homogeneous properties, the expense doesn't seem to match the revenue enhancement -- I wish very much this wasn't the case and wish very much that there was a better repository of collective data (like AI's failed-to-launch national comp database circa 2002). Or that the one national database that we all subscribe to was transparent, consistent, reliable, and robust.


Do you have 30+ homogeneous random samples to do a valid statistical analysis? Or are you doing nonparametric statistics when the Normal central theorem hypothesis does not work. If not, then it fails to meet the criteria of the normal probability distribution underlying everything taught in statistics 101. Have you ever calculated the Confidence Intervals on a simple or multiple-linear regression analysis? Looking at only the mean/median output is deceptive. For personal kicks, I did a regression model that I threw into church appraisals. The predicted Y (value) might be $1.5 million with a confidence interval of +/- $700,000. Useless. It made the report interesting to this nerdboy, but otherwise meaningless. Much of the articles in TAJ and other social science journals that apply regression analysis have R^2 statistics of well under 40% or worse. It means there was no correlation in the data. Long long ago, before AI started to pimp "statistics" for noobs, I was enthusiastic about such stuff and read intermediate level stats books. Now I see most of what is passed off as "statistics" in appraisal reports as bunk. Usually the appraiser (and sometimes the academic) is clueless and makes numerous violations of statistical principles. Fortunately it hasn't penetrated the profession too much. I guess I've become old school.

Well, you perhaps haven't gotten the memo, but many federal court judges disagree with you and no longer will accept some boomer appraiser getting on the stand and pulling a number out of his behind as an adjustment. In general, as I have I said previously, many appraisers on this site seem to restrict their search to a very small geographic region and hence have a small dataset. What drives buyers and sellers for the vast majority of properties on a nationwide basis does not vary considerably. This should be obvious by the commodification of apartments and shopping centers and office buildings.

So, unless you're appraising the Statue of Liberty or something similar, then I would say you're argument is ultimately irrelevant.

Now,of course - the quality of the data is highly relevant and it may very well be that it is not economical to perform these studies as the Appraisal Journal describes them.

For residential appraisers however, there is absolutely zero excuse, except in the most depressed markets.

On a side note, we can see to a great extent the divergence of modern economics from social science with the issues you discuss. You'll be hard pressed to find any real estate asset that truly follows a bell curve distribution. This phenomenon appears to be more related to genetic variation and mutation probability, which can manifest in a variety of ways. The classic example is the bell curve distribution of intelligence. Money lending appears to ameliorate the effects of this quite a bit.

 

[Terrel L. Shields]

This is not pointed to any individuals, but rather a bad system. A system that we are somewhat enslaved to.

Excellent post.

We neglect to adequately inform clients of degrees of risk.

A sore point with me for a long time. Give me a number but tell me how "solid" that number is.

For residential appraisers however, there is absolutely zero excuse, except in the most depressed markets.

I would argue that rural property, highly variable neighborhoods, and commercial property would be substantially different. Again, it is NOT economic to value say an airport (small, private strip with single hangar) for say a couple thou, yet you won't get the assignment until the banker finds someone that cheap. And this goes on and on. Or, worse, they pretend the assignment is simple when, in fact, there are some incredible complexities to it. We bid, we take the bait, and we are hooked doing a job for a lot less than it is worth. I can't think of an appraiser that hasn't been hosed that way.

Generating catholic data nationwide is no panacea when "all markets are local". We seem to forget that when we had the huge downdraft of 2007-12. But even when we could find small private airports that sold in say a 10 state region, to vet each, to thoroughly research the property and the sales circumstance, and extrapolate same into a local situation still leaves the accuracy suspect. But so said, "accuracy" only implies a local market sufficient to draw statistical inferences from same. What a small airport in S. California will bring has very little relationship to an identical sized airport/hangar used by a crop duster in Pocola, Oklahoma.

 

[Gobears81]

Well, you perhaps haven't gotten the memo, but many federal court judges disagree with you and no longer will accept some boomer appraiser getting on the stand and pulling a number out of his behind as an adjustment. In general, as I have I said previously, many appraisers on this site seem to restrict their search to a very small geographic region and hence have a small dataset. What drives buyers and sellers for the vast majority of properties on a nationwide basis does not vary considerably. This should be obvious by the commodification of apartments and shopping centers and office buildings.

So, unless you're appraising the Statue of Liberty or something similar, then I would say you're argument is ultimately irrelevant.

Now,of course - the quality of the data is highly relevant and it may very well be that it is not economical to perform these studies as the Appraisal Journal describes them.

For residential appraisers however, there is absolutely zero excuse, except in the most depressed markets.

On a side note, we can see to a great extent the divergence of modern economics from social science with the issues you discuss. You'll be hard pressed to find any real estate asset that truly follows a bell curve distribution. This phenomenon appears to be more related to genetic variation and mutation probability, which can manifest in a variety of ways. The classic example is the bell curve distribution of intelligence. Money lending appears to ameliorate the effects of this quite a bit.

I understand and appreciate this response-we have to hold ourselves to a high standard. I've seen appraisals that have a 35% adjustment for a single element of comparison but the adjusted range is nice and narrow. Somehow, I question whether they are truly supporting that adjustment from the market, rather than just forcing a range that is less than typical market variance. Conversely, I've seen appraisers that are not willing to go above a 10% adjustment in all but the most extreme examples, yet the adjusted range offers essentially no indication of where the value should be. Both appraisals/ appraisers would not likely have much success if being examined by an attorney that knows their stuff. But, Leasedfee is on to something also, as scarcity in the market does not often support the quality of data necessary to derive statistical adjustments. Typical market variance might be 10%, and doing statistical analysis might indicate a positive adjustment when it should in fact be negative. 30 samples is the accepted minimum dataset, and even then, there are reasons to reject the conclusions. I remember an AI instructor indicating that qualitative adjustments are the best route for appraisals going to court, and although many clients (and some appraisers) turn their nose to this method, it acknowledges scarcity of data in the market as well as the variance in adjustment levels, and although it is not perfect, it is more resilient to this type of examination.