Let’s focus on the big rocks, not the small rocks in this time of crisis
I shared my firm’s disclaimer for the Coronavirus to a group of appraiser colleagues of mine:
Extraordinary Assumption – COVID-19 was identified in China in December 2019 and quickly spread across the globe, including the U.S., evolving into a pandemic. As a result, the Federal Reserve cut the federal funds rate on March 3, 2020, by 0.5%, making the threat of the virus tangible to most housing market consumers. The Fed cut the federal funds rate by another 1% on March 15, 2020, to offset the expected severe economic impact as consumers began to pull back. While it is too early to extract the empirical implications for the housing market as a result of the Coronavirus, the client is aware that this valuation assignment relied on most if not all market data generated before conscious consumer awareness occurred on March 3. We will continue to monitor the market for potential impact on trends.
While it is great that the Appraisal Institute came out with recommendations as well, I took issue with their point that we should not call it an “extraordinary” assumption. An AI member who has been shunned by AI that was in this group sent me a private email, savagely attacking me and got very personal. I assumed he was just drunk and angry at the world. I thought to myself, this person represents the worst of our industry under the guise of being a professional, and represents why many of our challenges as an industry are brought about by not being able to see the forest for the trees. Yes, appraisers like this can be our industry’s own worst enemy.
In this case, extraordinary or not, the point is to get the message out to the reader of the report RIGHT NOW.
In the meantime, I have had many appraisers, and even banks, send me disclaimers they are seeing. Here are a few more:
Coronavirus (Covid-19) Pandemic Appraisal Ramification Alert
The country and much of the world is currently in the midst of navigating the impacts of coronavirus. Valuing real estate as of a current date presents unique challenges since appraisers primarily rely on recent historical data as well as trends and forecasts (which are particularly tenuous in the current environment) in ascertaining value. In these unprecedented times, it is conjectural to project what sustained effect there may be on the economy and the market value of the real estate in the coming weeks and months. That being said, re-engagement of an appraisal in the near future may be very prudent.
The date of value in this assignment is subsequent to emergency declarations regarding the Coronavirus (COVID-19) in March 2020. The scope of this appraisal assignment does not include the measurement of any effect of these events on the real estate market or on the value of the subject property. Therefore, the value opinion and other conclusions expressed in this report are subject to the extraordinary assumption that these events have had no effect on the marketability or market value of the subject property. The client and intended users of this appraisal are cautioned that if this extraordinary assumption is incorrect, the value opinion and other conclusions expressed in this report could be significantly different.
NOTE: This appraisal is dated as of 03/16/2020. On 03/11/2020, a Utah Jazz basketball player tested positive for the COVID-19 illness, the game was cancelled and on the same evening the NBA season was suspended. On the same night, Tom Hanks and his wife announced that they had also tested positive for the SARS-CoV-2 virus. These three events are credited for bringing this illness to the attention of the American people. Within hours, schools of all levels were dismissed. In the following days, Americans were advised to remain at home and businesses were shuttered. The news and developments around the illness are constant daily and the US Government is announcing monetary aid to citizens to offset the economic downturn. This illness is unprecedented in modern times and as a result, it could have far reaching effects on economic and market conditions or trends but since the time from public recognition to the appraisal date is only 5 days, changes in the current market have not been measured to date and cannot be determined for this appraisal.
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