Appraisal Profession, Appraising

Skepticism Can Lead to Poor Decisions

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Are you a skeptical person? At times, I suffer from moments of skeptical thinking. If you’re an appraiser, like I am, the nature of our work can at times cause us to become skeptical.

A homeowner or agent may appear to exaggerate information they share about a home. It could be with regards to improvements made to a property, minimizing a significant repair, or overblowing a minor repair. Of course, this can be due to the motivations of each party. This does not happen all of the time. But, it happens enough that it can create a little skepticism in the minds of an appraiser.

By the way, if you’re a real estate agent, you no doubt have experienced these same issues with some that you work with or work for. I think our culture is becoming more skeptical and less trusting in general, which really saddens me. In this article, I am going to focus on the dangers that skepticism can have on an appraiser’s thinking.

In addition to the aforementioned situations, at times we may have a client that appears to be more interested in our hitting a number, getting a report back quickly, or cheaper than they are in the support behind our opinion of the value of a property.

We may also hear of an appraiser that makes a career-altering mistake on one report, despite providing quality appraisal work for decades. Chances are that one mistake is not going to lead to an appraiser’s losing their license, but it could.

When it comes to these things, it can be easy to develop a skeptical attitude.

The truth is, appraisers, do need to have a healthy dose of skepticism. After all, we need to verify information using multiple sources to ensure that the information we are relying upon to develop our opinion of a property’s value, is based upon the best and most accurate information available.

Sometimes, just taking a person’s word for something can backfire on us. So, having a measure of skepticism can be a protection. However, if not kept in check, skepticism can morph into an attitude that can lead us to make poor decisions. Let’s talk about it.

SKEPTICAL REASONING

We must be careful to not let skepticism negatively affect our work. Have you ever heard an appraiser make a statement that is similar to one of the following?

“I don’t see what the big deal is with supporting my adjustments. No one can really prove that their adjustment is exactly correct, so what does it matter?”

“Show me any report, and I will find mistakes in it, so I’m not going to put that much time into my appraisals. They can’t be perfect anyway.”

“What’s the big deal about measuring the home we are appraising? After all, the public records and MLS are probably not accurately reporting the size of the homes I am using as comparable properties, so what does it matter?”

Would you agree that these thoughts might be fueled by skepticism? What is skepticism anyway? Skepticism is having an attitude of doubt.

Let’s discuss each of these arguments and why we should not allow skepticism to cause us to make poor choices in these three areas.

ADJUSTMENTS

When an appraiser makes the statement that no one can “prove” that one specific amount is the only supportable number, I would agree. Adjustments have ranges. While that is the case, when it comes to making adjustments, we must have some support for the ones we make. Why? Because the adjustments we make or choose not to make, impact our opinion of the market value of the property we are appraising.

If we make an adjustment, we must have some support behind it. That support should be by means of recognized and repeatable techniques. Plucking a number from the air is neither a recognizable method nor is it repeatable. Well, I guess it is repeatable if one uses the same number over and over. But it’s not repeatable using market data.

Without the proper market support for our adjustments, we are simply relying on our own views. We could be accused of being biased. That’s a hot topic right now in our profession. Without market support for our adjustments, our clients might rightly wonder why we decided to use the adjustment that we did. One of the best ways to defend ourselves against accusations of bias is by properly supporting our work with market data, which includes our adjustments.

Therein lies the value appraisers offer to the public. It’s not just the appraised value, it’s the detailed support behind how we develop our opinions that is key. So, to say that we cannot “prove” an adjustment is not an excuse for not supporting it. If we can’t support it, then we shouldn’t make it.

ERRORS

Despite our best efforts, every appraiser makes mistakes. It would be a mistake to have a cavalier attitude about the quality of our appraisal work, simply because we all make mistakes.

USPAP Standards Rule 1-1(c) makes the following statement: “Perfection is impossible to attain, and competence does not require perfection. However, an appraiser must not render appraisal services in a careless or negligent manner. This Standards Rule requires an appraiser to use due diligence and due care.”

If an appraiser cannot perform a perfect appraisal, clearly every appraisal will have some mistakes in it. While that’s the case, we want to do our best to make as few errors as possible. If we were to develop a skeptical attitude, thinking that it doesn’t really matter, we are going to set ourselves up for trouble in the future.

It would also be a mistake to assume that, because we found a mistake in another appraiser’s report, they are not a competent appraiser. If we’re honest with ourselves, no matter how good of an appraiser we may be, if someone reads one of our reports, you can be sure that they will find things that they could point out that we could have done better. Maintaining a humble attitude will help us to remember that.

Good appraisers often became skilled by learning. Learning means that mistakes will be made in the process. Sometimes, when implementing a new technique, we may make some mistakes along the way. Does that mean that we should not bother improving our skills? Not at all!

In my view, we are better off striving to improve our skills, even though we will make some mistakes along the way, than to never grow, and potentially continue making other mistakes over and over because we didn’t take the time to learn how to do something right, or better.

MEASURING

I know of some appraisers who do not measure the properties they appraise, even though they are expected to when making a physical observation (inspection). Some may think, “how do we know that the finished square footage reported in public records is accurate for the properties we are using to compare to the one we are appraising?” “So what does it matter if I use what the public records reflect the finished square footage of the property I am appraising to be?”

Truthfully, the square footage that public records reflect is often inaccurate. However, appraisers that use this reasoning to justify not measuring the home they are appraising, when it’s within their scope of work to do so, might not be thinking about two important reasons why we measure the property we are appraising, if it’s within the scope of our work to do.

First, it’s part of the verification process. That’s the same reason many of our clients require that we make a physical inspection and measure the improvements of the property we are appraising. We measure the improvements to verify that we are appraising the home based upon accurate square footage, which has a direct impact on market value in most cases.

Granted, there are some types of appraisals where we do not need to measure a home, or even inspect it. But if our clients require that we make a physical inspection of the home, they usually also require that we measure it. That leads me to the second reason to measure the home we are appraising if our client expects us to.

If our client has made measuring the home part of our assignment requirements, and we refuse to do so, we are breaking USPAP Standards. As long as our client’s assignment conditions are not violating USPAP Standards, we must follow them. If we are not required to do so, we should explain that clearly in our report along with the source of our square footage for the home we are appraising.

When it comes to the comparable properties we use in our comparisons, we do our best to accurately verify the square footage of those homes. At times, this can be very difficult. We usually do not have the opportunity to measure those homes we are using for our comparisons. Clearly, if the square footage of the comparable properties is reported inaccurately, it will impact our opinion of the market value of the property we are appraising. But once we’ve done our due diligence in verifying the accuracy of the data we are using, there’s not much more that we can do.

Just assuming that the reported square footage of the homes we are using as comparables is inaccurate is not an excuse for not measuring the home we are appraising if it’s within the scope of our work to do so.

In his book, “Risk Management for Real Estate Appraisers and Appraisal Firms”, Peter Christensen, Esq., lists making an error in measuring or reporting square footage of the home being appraised, as the second common reason why appraisers get sued. By the way, if you’re an appraiser, I highly recommend you purchase and read his book. It’s got a lot of great advice!

While we’re on the subject of measuring homes, Fannie Mae just announced that starting in April of this year, appraisers are to measure single-family homes & townhouses using ANSI Z765 2021 standards. (ANSI Standards are not used for measuring multi-family properties)

Measuring To ANSI Standards Will Require More Precision

So, this is going to require more precision on the part of appraisers when it comes to measuring and reporting square footage. Especially for those who have not yet been using a measurement standard. Whether you agree with the change, or not, the change is happening and if we perform appraisals that must adhere to Fannie Mae’s requirements, this is not optional.

Some have argued that ANSI measurements don’t always reflect the market. That is true! We may measure to ANSI Standards, but we appraise based upon the market.

If there is a conflict between the two, we must still find a way to credibly appraise a home, accurately reflect the market, even when ANSI Standards may conflict with the view of buyers. And it can be done! It does require more commentary to explain what we did and why we did it. However, as long as we properly explain the situation and what we did, we will not be misleading the intended user of the report. At least in my opinion.

Clearly, at times, a healthy dose of skepticism is helpful when appraising a property. However, over the years, I have witnessed appraisers who have allowed skepticism to cloud their judgment and make decisions that could cost them their careers down the road.

It can be a slippery slope. Sometimes in appraiser forums and social media groups, skeptical thinking can abound. While these places can be beneficial for learning from other appraisers about how to handle different situations, be careful not to allow the skepticism of others to influence you. Keep skepticism in its place and do not allow it to influence you into taking shortcuts, thinking that it doesn’t matter, or looking down on the appraisal process because it is not perfect.

Use skepticism as a tool for motivating us to do good investigative work and not as an excuse for cutting corners.

Every appraisal we complete is not only a reflection on us individually, but it also reflects on our profession. While none of us are perfect, we should be striving to improve our skills every year. Small improvements made every year will add up! Striving to become more skilled often leads to our being more humble, because the more we learn, the more we realize we need to learn, and that’s a good thing. That type of attitude will motivate us to continue to grow and learn, which in turn can lead to our work becoming more satisfying and lucrative.

It has been the goal of my blog to educate the public on the work that we as appraisers do, to help people see that appraisals are much more than simply picking a few comparable sales, putting them on a grid, and making a few adjustments. What we do and how we do it is profoundly important to the continuance of our profession.

To all of my fellow appraisers, continue to do good work and have a great 2022! Don’t let skepticism infect your thinking. I promise to do the same. And thank you for all you do!

And if you’re not an appraiser, thanks for letting me drone on about this subject for my first post of the year. Don’t worry, I have more articles planned for your enjoyment and education in the weeks and months to come.

Whoever you are, wherever you live and whatever you do, my best to you in 2022!

Thanks for being here!

This week I leave you with a little story about Johnny Skeptical. Enjoy!

Have a great weekend!


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I am a member of the National Association of Appraisers. If you’re an appraiser, and you’re looking to join an appraisal organization, please check them out. The NAA is made up of fantastic appraisers from across the country who are working hard to keep their fellow appraisers up to date on what’s happening.

Click here to visit their website.


Here are some links to other articles I’ve enjoyed recently! I hope you will also… 

Will 2022 Have A Psycho Killer Housing Market?- Housing Notes by Jonathan Miller

Real Estate Appraisal’s Future? – The Appraiser’s Advocate Podcast

What is the Principle of Substitution in Appraisal? – Birmingham Appraisal Blog

The most agressive housing market ever? – Sacramento Appraisal Blog

Appraising in 2022! What Will It Be For You? – DW Slater Company Blog

Is Appraisal Obsolete — User Expectations? – George Dell’s Analogue Blog

Appraiser Retirement – APPRAISAL TODAY

Real Estate Appraisal’s Future? – The Appraiser’s Advocate (PODCAST)

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