How can we fix the excess of appraisers?  Easy — we do what we have always done, each time . . .

1) We will raise the standards (“cost of entry”).  2) We will make it harder to become an appraiser;  3) Lower fees will discourage newcomer appraisers.

Each cycle, the ‘appraiser shortage’ cycles with an ‘excess’ of appraisers.  Always just in time to exaggerate the economic cycle of real estate, rather than moderate it.

This is the way we’ve always done it.

In recent issues of the Analogue Blog, we have considered the “five forces of friction” on the advancement of valuation.  Here we consider how these “frictions” will behave as appraisal demand drops.  And just as each of the five forces find ways to reduce or “eliminate” the need for valuation expertise.  Recall the five forces:  practices, standards, education, regulation, and client expectation.

In this blog, we consider the first friction –valuation practice.  How might practice be “modernized.” Revised to level the repeated ugly economic cycles, assist in diversity, eliminate bias, and wholly update the obsolescent, subjective, and un-reliable appraisal ‘process’.

“Established” appraisal practice:  the first faltering friction.

• The traditional process is: 1) pick comps; 2) adjust comps; 3) form opinion; 4) deliver opinion.
• The modern science is: 1) isolate market; 2) measure market); 3) set subject; 4) deliver result.

Traditional point-value opinion provides no measure or even a sense of reliability or risk.  The stated “trust me” goal is credibility – where the appraiser is just “worthy of belief” – as defined in USPAP.

For non-residential work, current practice is still dominated in the concepts of the accountant’s spreadsheet (with add-ons).  The 40-year-old, hand-held HP12c remains the standard, even as modern real analytics software (and even the spreadsheet), are faster and transparent.  Reconciliation, with no real reliability/risk assessment remain as narrative storyline about the ‘three approaches to value.’

For residential appraisal work, obsolete ‘form’ reports — box our logic.  Focus on the ‘neighborhood’ obstructs the real objective – the market, analysis of the Competitive Market Segment, (CMS)^©.

Reproducibility, connectivity, and actual reliability measures are foreign to traditional practice.  This traditional ‘established’ appraisal practice remains the standard, the client expectation, the regulation enforcement, appraiser education and license certification pass scores.

Current data-stream technology makes obsolete those restrictions of old groupthink . . .  Today’s modern methods of data science enhance and improve the core issues of public trust and equity.

Evidence Based Valuation (EBV)^© will change things:

Economic cycles are moderated: 1) micro-forecasting of value; 2) risk/reliability scoring; 3) fundamental value measurement;  4) real-time revaluation; 5) policy (monetary and fiscal) refinement.

Bias – 1) Analytical bias is prevented through reproducible data models; and,  2) Personal bias (intentional and unintentional) is stopped by analyst similarity models, not the ‘trust me’ approach.

Diversity is enabled:  1) Prejudicial bias is minimized with evidence, not personal opinion judgment; and, 2) New technology-based methods are a natural for younger cohorts, and require  minimal personal training, and no endorsement of “designation committees” necessary.

The excess of appraisers is temporary.  Retirees will retire.  Form-fillers will have no forms.  The invisible hand of markets will promote public trust.  Evidence based methods are here.  Who will require them?