Starting out in this business, my father once told me that real estate appraisal is not merely a science but an art as well. Many people understand the science of data gathering and analysis. Some are good at reporting their findings, but few report their findings in a way that enables the user of the appraisal to understand the relevance of the information that is being presented.
As licensed objective professionals, we must make sure the information, as presented in the report, is not only factual, but also relevant to the valuation process. Our professional obligation is to ensure that the service we provide is not misleading and will not lead the user of the report to erroneous assumptions or conclusions.
What prompted this particular soap box has been the news reports that continue to report housing trends nationwide. Many lenders have become stymied in what was once called analysis paralysis. Appraisers have been placed in a position of defending every statement that goes into their appraisals and if the news reports information about a particular marketplace that are not consistent with the data that the appraiser is presenting then the appraiser is assumed to be wrong.
My suggestion is not one that is new. I suggest that when you write an appraisal report, you write the report as if you are going to end up in court and have to defend your report before a judge. If you follow this advice, I guarantee that the instances you end up in court will be diminished by more than 98%.
The best defense is a strongly documented work file and I believe with today’s technology we can import MLS data into excel and create niffy worksheets and charts to easily document and demonstrate the market data and trend of supply and demand and the information that is relevant to the appraisal process.
Perhaps if clients were getting this information up front, they would be able to find some level of comfort with the information that is presented for their use and consideration.
Of course, as an appraisal reviewer and forensic fraud reviewer, I am painfully aware of the need for review. But if appraisal files were documented up front with public records and MLS records attached, it would limit the need for reviews on the same degree of work and we could then focus on those appraisals that are not as defensible.
See you around the water cooler!