What Kind of Appraiser Are You?
- Bias. It’s Easier to Blame the Messenger - April 20, 2022
- Hocus Pocus Magic Focus? - March 24, 2022
- Opinion, Estimate, or Prediction? - September 8, 2021
Skeptical skeptics are a rare breed. But growing in number…
Different appraisers have different attitudes! Some have a lot of experience, others a lot of education. Others emphasize the ‘art’, while others consider themselves ‘quants’.
Let’s put aside the ‘art’ versus ‘science’ discussion, where the artists say: “No computer will ever replace the appraiser”, or “No amount of education will ever replace experience”. The other side seems a bit confused. There are traditionalists. And there are the “advanced” appraisers. And there are the “vocational” appraisers, who don’t seem to care much about all of this. They just want to push through as many reports as possible. The skeptics tend to doubt some of the old theory, as well as some of the “new theory”.
I was trying to figure out how the “data science” asset analysts fit in with the possible categories. It seems like the best breakdown is these four types of appraiser: traditional, advanced, vocational, and skeptics.
The traditional professional tends to be well-educated and often holds designations. The grounding is in the ‘three approaches’, following the education established some 50 or more years ago. Advances have been in the use of the DCF (discounted cash flow), spreadsheet add-ons, and spreadsheet comparable adjustment ‘grids’, and narrative report software. Recently, there seems to be less and less analysis, and more qualitative conclusions based on qualitative differences or ordering. There may or may not be narrative discussing the various differences in elements of comparison. There is little or no awareness of data modeling or the relevant skills needed. The emphasis is on property analysis, not data analysis. Good judgment is exalted.
Advanced quantifiers are traditional professionals, but have taken the advanced courses, which emphasize inferential sample statistics (calculating t-scores, p-values, hypothesis tests, and confidence intervals). Some of the ‘advanced’ quantitative methods have helped them toward a less qualitative and less subjective, opinion-based attitude. Unfortunately, some of the quantitative methods have been misused. (As noted in The Appraisal of Real Estate, 14thed., p. 749.) Good judgment is exalted.
Vocationals tend to be residential form-filler appraisers, or ‘bottom feeder’ non-residentials. Many now work mostly if not wholly for AMCs at low fees, but working fast to make up for the lost income. The key skill is often to ‘help make the loan’, supporting the sale price with – support.
Skeptics include some of each of the above. The vocational skeptics justify and even believe they should be meeting client expectations, and doing what their peers do, as USPAP (Uniform Standards of Professional Appraisal Practice) and state law require them to do. The traditional skeptics may have doubts about things, but must find ways to justify their own practices. They may even be cynical about their own work or our institutions. But it is a continuing career for them, with no real alternatives for someone with this one skill of many years’ experiences.
The advanced skeptics may be overwhelmed by the culture of groupthink. Everyone seems to go along. The best courses teach the “random sample” inferential statistics as being smart. Therefore they must go along. A few others of the advanced skeptics may be disturbed, but realize that the depth of knowledge required to challenge the establishment teachings – is overwhelming.
Skeptical skeptics are a rare breed. But growing in number. They are drawn to the fundamental simplicity of data science logic, visual representations, and using computer power, rather than fighting and making an enemy of it. They see the potential for additional value-added products. They see the potential to provide services truly needed by our collateral investors, counselors, and government agencies. They realize the fundamental principle of data science: the need for a field related expert as a critical part of the discipline. We call it Evidence Based Appraisal (EBA) ©.
Seriously? Which of these boxes do you shove yourself into? Why do you think anyone is interested in sorting and categorizing appraisers?
It’s an advertisement piece which covertly pushes statistical analysis- he’s the owner of Valuemetrics… says it in the top of the article as his introduction. In other words, it’s sales propaganda for his software and courses
What a waste of 2 minutes
This has been my experience since starting my Appraisal business in 2003. Appraising is a Cottage Industry, not a profession (IA Cert folks will disagree) With many tribes and factions not found in say IT, Legal, Sales, Medical and Government, etc. That’s how the Banks and the last ten years of their AMC agents have taken over Valuation (Appraisal) business.
Dumb and not helpful. I’m disappointed that George published this
Is that it? Seems unfinished. No analysis or support of the premise. No conclusion.
You forgot a category, (realist). A realist is someone who has the foresight to understand this business model is obsolete. And the powers that be would rather layer more obsolescence then clean the slate and update the model. Big data is coming at us like a freight train and trying to preserve tradition is futile. How can the lending institutions have confidence in appraisals when you have 20 appraiser’s appraise a property and have 20 different numbers and it doesn’t matter if the appraiser is a skeptic, traditional, vocational, advanced or brilliant.
The ‘it’s all old fashioned’ argument? Sure it is, checks and balances are a necessary fundamental to sustain economic liberty. The implementation of checks and balances is how Americans solidified their economic liberty after the revolution. Other things are old fashioned as well but are still taken for granted, truth, ethic, honesty. Should we get rid of them too? Be careful what you wish for.
Data analysis alone allows for systemic defects in data reliability. Full service detail orientated appraisers still play an important role, despite the ongoing automation of the process.
There are several negative comments here. If they can write what they feel are better articles, please do so. ‘Everyone’s a critic.’ Some things change, others never do.
I’m not wishing for anything I’m just stating a fact. I’m sure you remember Blockbuster, dial phone and fax machines. Technology passed them by if the appraisal business doesn’t change we are going to get left out in the cold. In fact it’s already started, they say the inspection side of the business is not as important as the data side, so now someone else is doing the inspection. However I totally disagree not anybody can do a good inspection but a computer can calculate data better than most. They call us form filler’s and if you look at what we do we have become form fillers. We fill out an outdated and redundant form much of which is worthless information.
Or, as an alternative, we can go back to building our businesses and reputations on the quality of our work rather than how fast we can assemble someone else’s statistical bundles into a pretty report.
More and more I am thinking of focusing all my work on appraisal & ‘make believe valuation alternatives’ review for litigation purposes. Target clients could be those that were urged to take appraisal waivers; obtained evaluations or had local bank branch managers ‘certify’ values based on AVMs or hybrids.
Good luck with that
Have any examples of property that has had twenty different appraisers and twenty different values, Herb?
Of course not but in the last 15 years I haven’t seen any appraisals of the same property with the same opinion of value.
I have seen FIVE with 2 the same value and the other 3 just slightly higher and slightly lower within 1% of each other. There are differences of opinion in appraisals. Data can be a tool, but it’s not any more capable of being “exact” then we are. We are not building rocket ships. We are tasked with determining what a typically motivated market participant will pay for a particular property on a specific point in time. Just because it costs XYZ to build, will the buyer pay XYZ to live in the house?
The fact that everyone is pushing for all data science and eliminate the human element in a very human process is a dangerous road.
My experience with avms is a range of from $450k to over $750k on a $650k property. That’s way too big a spread for 4 avms. My FAVORITE recent one was a sale for over $3.5 million and a RealAVM same effective date as the closed sale for $1.6 on the same property.
Today in checking comps histories (and history for my subject) I saw a REDFIN “value estimate” of $1.5 for the $2.4 million apartment building 2 months after my 2017 effective date. No, I don’t regularly use redfin, but I DO check Google online by addresses to see as much as I can about my subject. In this instance, it also showed “Not for Sale” along with their unsolicited opinion of undefined value for my client’s property in an issue that may be litigated. By the way my client’s property hadn’t been offered for sale in over ten years. The morons at Redfin just arbitrarily decided to post a value on a property they have NO RIGHT to be offering. I was forced to address it in my report now to head it off at the pass before my client’s case goes to court.
The client is an attorney. Maybe I can convince him to sue them. Especially IF it is brought up in court.
Maybe taking the other side, measure how many appraisers come out within 5% or less of each other. The Re-LOs do, the two original independent appraisals typically come within that limit or less. When they don’t they commission another, and maybe another. Download 100 closed sales and the Finale ratio of lp/sp. Thirty to 40% of the closed sales range within 97% of the final offering. Maybe that an argument for the powers of negotiating, but who are appraisers but a tool of the negotiating.
What was the old was?? Anecdotal comparison, rationing the acquisition price or cost? Comparing sales two and three years old because of a slow economy, comparing a 40 acre farm with a home to a 80 ace foam with a barn and a cow?
Banks and lenders operated as individuals. when savings would accumulate they loan. They could expand into loaning on machinery for industry, livestock or fertilizer & seed. If they decided to loan a local builder for housing, they would influence the price of housing. BoA was big into agriculture, their decisions to more on housing influenced values. These bankers could and did make value by the economies they controlled.
Appraisers can’t do it by themselves, the banker, the builder, the city planner do. And they do it with advisories from scholars, builders, politicians who rely on published information from repeatable dependable sources
Interesting that valuable time was spent writing this. I guess I took away something by reading. I will say, if I worked for an AMC and I was referred to as a “bottom feeder”, I’d be pissed….
I’m a traditional skeptical vocational appraiser, um, I think… I’m not entirely sure and need more options!
Forgot transitioning. Lol
There is no last line of defense, appraisers are like lone wolves fighting everybody, there is no last line of defense when you are constantly dealing with intentional or unintentional scammers, shysters all day.
You forgot to include the extremely happy retired appraiser category.
There are only 2 types, those that do the job right and those who don’t.
Let’s see,..Ummm……Money making appraiser.
Great job of categorizing, with some omissions, but the meat and potatoes were not served. There are so many categories because the people who control 90% of the business don’t care about a quality job and don’t even consider the person doing the job (the appraiser) when it comes to making rules and guidelines. Appraisers profits have been slashed in half and the opportunity to increase profit has been taken away. So the appraiser is incentivized to do the bare minimum. After all, the independent appraiser “should” be a business person first!
On the appraiser’s side, we have the sellout review appraisers who let the bank/amc dictate policy that reduces appraisal quality, in exchange, they get a steady fat paycheck. You have appraisers who say their “money making appraisers”.
In the bank/amc climate, there is no room for “healthy profit” based on the price-controlled fees. So if their “making money” as a term that is commonly used as making an exceptional profit, then serious corners are being cut, unless there is an anomaly situation, such as minimal competition.
Finally, what baffles me most is that banks/amc’s and even many appraisers don’t acknowledge the huge variance in markets and degrees of difficulty. Banks want to pay the same fee for every market. Newer tract homes are much easier to appraise than a home built in 1920 that has gone thru five remodels and one or two additions. Banks want to only approve a fee increase if they can see additional time needed due to the physical process drive-time etc… In my market area, recent sales data is sparse. So it may be a standard type of house for the area, but because of the limited data, additional processes have to be performed, explained and exhibited. Technology can help the appraiser perform his analysis, but technology as a whole is not capable of doing the job alone – not yet. Especially when market activity is changing. I think many appraisers don’t understand this because they work in tract home areas.
And last but not least, software companies and the banks boast about the new tools available to help the appraiser do a better quality job, and they charge a fee for them and make a profit. Meanwhile, the appraiser’s profit has been cut considerably and there is no way to increase profit.
Right on the money !
That’s the same brand of BS lenders try to push. You either have the skills or you don’t. What a waste of 10 minutes!
George, respectfully I think you did yourself a disservice with this one.
I agree. Although there is some merit to it, I don’t think it is helpful to create division based on opinion when we are trying to unify our profession against the forces working to eliminate us.
And, from a pure writing standpoint, this lacked a point or conclusion. I’m a huge fan of George…but this one has me scratching my head.
I have great respect for him even though I don’t always agree. It’s got to be extremely hard separating the learned academic, and nationally renowned appraisal expert from the business owner promoting a tool for our toolbox that has already been horribly abused by others.
George offers it AS a tool. Others in the lending and AMC world think it is a solution unto itself. Nuances have been lost or buried in our profession in recent years.
Mike, I’ve been in danger of thinking the stats were not just a tool. It had me absolutely hitting a brick wall. My mentor just let me hit the wall until I finally figured out how it helps my analysis…now it’s one of my favorite tools, but I don’t let it be THE only thing. After spending time scrubbing data, I know it’s not reliable enough to replace the actual appraisal process.
Taunya, if it were only promoted s a tool I’d limit my concerns to the philosophical arguments of how its more scientific if it too relies on subjective, human opinion (scrubbing) to arrive at its science supported conclusions. (NOT the intent of this response btw). I can concede its validity as another tool in the box.
My real and immovable objection to regression and other’s data ‘science’ is all the AVM hucksters and fraud facilitators that claim their magical new whoopsiedoodle algorithms combined with ePixie dust and fairy pharts are producing ‘credible results almost as good, or even better than real appraisals.
https://www.clearcapital.com/platform/clearcollateral/ These are by no means the only players in the game of claiming they can do what we all know they can’t.