Slow down, you move too fast, or, are you working too hard and not paying attention? - by Bill Pastuszek

Bill Pastuszek, Shepherd Associates

If you are too busy to read this, you are working too hard! It’s been a busy summer time for commercial and residential appraisers. Plenty of work, tight deadlines, and the ability to pick and choose clients and assignments.

This is a time to be vigilant. You may be working too hard if your focus is mostly on getting the current job out and the next one up on the screen. Workloads and client pressures of various sorts conspire to create quality control issues that could turn into future problems.

Copy and Paste Masquerading as Market Analysis. While commercial appraisers are particularly prone to this syndrome, plenty of residential reports load up on means and medians from The Warren Group and MLS and other sources. If you choose to use other’s information, it’s your job to demonstrate, in your own words, its relevance.

Non-Attribution of Data Sources. At the very least, not referencing the source is sloppy and leads the reader to assume the appraiser is taking responsibility for facts and opinions of others. At worst, it’s plagiarism.

Mailed In Highest and Best Use Analysis. The highest and best use section is not boilerplate. This part of the report matters, it really does. Take advantage to explain the subject’s advantages/disadvantages, alternative uses, and market forces and how the section’s opinions impact the valuation analysis to follow.

For residential appraisers, USPAP requires an opinion of highest and best use as vacant and as improved. The form only asks for highest and best as improved. This is not done as much as it should be: it’s required.

Misdirected Reliance on Averages or Medians to Arrive at Value Conclusions. Particularly prevalent in commercial assignments; residential appraisers don’t generally admit to averaging. Appraising trades in small, not statistically significant, datasets. Appraisers are paid to provide logic and reason in their analyses. Relying on spurious statistical measures masquerading as analysis or reconciliation is, well, just plain wrong.

Screen Shot Fever. Screen capture programs are ubiquitous: reproducing an entire chart for one or two numbers no longer impresses? Charts and graphics should be pertinent to the assignment, not just an easy way to fill some space. The appraiser needs to demonstrate what is relevant and why. Consider which of the numbers are really pertinent and present them rather than a mass of undifferentiated data.

The Dart Board Method - Mysterious Capitalization Rate (Commercial) or Gross Monthly Rent Multiplier (Residential) Conclusions. Capitalization rate and multiplier conclusions picked from a wide range are mystifying to readers. Relying on an average or a number that happens to fall within the range reflects a certainly lack of understanding or an appraiser’s haste and lack of focus in arriving at these. (See following section on Reconciliation.)

Presentation. Clean, well-designed presentations with good photography and graphic quality no doubt creates favorable, professional, and lasting impressions. However, get too fancy and you have the all smoke and no fire syndrome. Pretty graphics won’t overcome unsupported opinions, questionable data, and erroneous judgments.

Reconciliations. Generally and Specifically. USPAP requires reconciliation in each approach. and a final reconciliation as part of the concluding actions in an appraisal. So, arrive at a reasoned conclusion! Logically supporting conclusions resulting from analyzing sometimes inconsistent and seemingly contradictory data is the essence of what appraisers do. (See also preceding section on Averaging: not reconciliation!)

Pursuing Perfection. USPAP tells us that “perfection is impossible to attain.” But accuracy is not. USPAP reminds us that a series of small errors can lead to a larger, erroneous result. USPAP places great emphasis on credibility of assignment results and not producing misleading appraisals: so, don’t be that guy (or lady)!

Don’t Expect Reviewers to be Your Proofreader. A reviewer should not be the second person to read your report. Take the extra step of actually proofreading the report as if it was someone’s else’s work. Or, have someone else look at the report.

Editing and proofreading, checking numbers and facts for consistency throughout the report, are manual, human tasks. Completely necessary. Software only goes so far. Do it.

Also realize that, on the residential side, Collateral Underwriter (CU) won’t save your bacon. For commercial or residential, when the loan gets into trouble or gets audited a couple years down the road, you won’t get a pat on the back, saying, “that’s OK, it was busy back in 2016; we understand why you created this sub-par appraisal, you were too busy to do a good one.” No doubt, work product that is the result of making haste and taking shortcuts risks the appraiser’s license and reputation, and exposes a client to great risk.

In this busy time of positive market conditions positive, the pundit has said, “A rising tide floats all boats.” And, in the bad times, as Bob Marley said, “When the rain fall, it don’t fall on one man’s housetop.” Don’t be too busy to do the necessary work and write strong reports. The stakes are too high.

Bill Pastuszek, MAI, ASA, MRA, heads Shepherd Associates, Newton, Mass.