Appraisers' Free Forum

I don't mean to pick on this particular blog because they are good on appraisal news. However, to me, they produce technical material that sometimes appears to have been written by Bozo the Clown and peer-reviewed by Stevie Wonder.
http://appraisalnewsonline.typepad.com/appraisal_news_for_real_e/2008/07/the-integrity-o.html#more

It's not just that I disagree with the main premise of the article and resent the article's implication that my having integrity is contingent on seeing things his way that popped my cork. It's this graph. If the graph is intended to prove his point about the viability of the income approach for houses, it can't, because he left the sales prices out of the analysis.
http://appraisalnewsonline.typepad.com/photos/uncategorized/2008/07/21/grm_trend_line.png

I am willing to overlook that he has a scant 8 sales labelled "Southern Maine," (maybe southern Maine is smaller than I think), and I am willing to overlook that he doesn't say whether these houses were rented when sold (possibly income properties), or whether they are sales to property users for which he estimated the market rent. However, the part that can't be overlooked is that he left price off the graph that is supposedly proving some point about price. He is trying to demonstrate that rent is a predictor of price, but leaves price off the graph. Instead, he graphs rent and GRM.

The points are so scattered, that there is no reason to plot a linear trend, but he does it anyway. He then adds a "curved" trend line which snakes around like a horseshoe.

Beam me up, Scottie!!

You get a GRM by dividing sales price by rent. Sales price may not be on the graph as a separate item, but it's sure incorporated in the GRM. I, too, think he should have used on the graph what he's trying to prove about the market. So sales price isn't left out of this thing; it's just distorted.

I believe the point he's making is that you can't simply discard an approach for arbitrary reasons--and he's right.

But so is George Cox. George wrote an article which proposes that the approach used is directed by the actions of market participants: The cost approach should be used for unique or thinly-traded properties; the SCA for properties traded by owner-occupants; and the income approach for properties traded primarily for their income streams. This guy has gone to a lot of trouble to demonstrate with numbers what can be readily proven during sale verification.

Pina Colada wrote:
I am willing to overlook that he has a scant 8 sales labelled "Southern Maine," (maybe southern Maine is smaller than I think), ......................!

Using "Southern Maine" is a bit silly because real estate values vastly between eastern Southern Maine (on the coast and close-ish to Boston) and western Southern Maine. So I don't see how this would work .....

Jim Plante wrote:Sales price may not be on the graph as a separate item, but it's sure incorporated in the GRM.

But "incorporating" it "distorts" (your word) the very relationship the analysis seeks to test. I had my associate (son who starts fifth grade tomorrow) keypunch the data points off the graph, so that I could compute/impute the prices, and create an appropriate graph. The keypunched data set and graph are attached.

The graph shows the "normal" or general linear relationship between rent and price one would expect to find. The properties with higher rents tended to sell for more. That still doesn't tell us where the rents came from.

My point was that this analysis is pathetic and incompetent, regardless of what point or theory it is trying to demonstrate. Worse, the author has the audacity to challenge others' integrity on the basis of this. Is this emblamtic of what our profession has to offer the public? This is a published article.

I believe the point he's making is that you can't simply discard an approach for arbitrary reasons--and he's right.

I believe that's spin. You are casting it in its best possible light, and at best, it's a straw man argument, that is, refuting a proposition that no one is making. You might as well say his point is that one should not smash oneself in the head with a hammer -- and he is right. I have read (literally) more than a thousand journal articles covering valuation, parts of (literally) dozens of textbooks, and have more than a thousand course hours. I have never, NEVER seen even a single author advocate "simply disacarding an approach for arbitrary reasons." And even granting the assumption that there is merit to winning a straw man argument, I don't see where he could win ANY argument with that graph.

I am not trying to get sidetracked into his "theory." I suspect that the same level of thinking that went into to creating the graph went into the rest of it.

Had some trouble attaching.

Here is another one. It explains the "illegality" of comp checks, how USPAP makes comp checks illegal.

This has so much erroneous information that is the basis of so many bogus inferences, I'd have to get my hourly rate to go through and catalog it.

Enjoy.

http://appraisalnewsonline.typepad.com/appraisal_news_for_real_e/2007/01/value_checks_co.html

At least two guys called him on it, too.

The August QA on comp checks should have been a big-time wake-up call. I guess he would just think the ASB has gone mad.

It really annoys me when appraisers have such limited analytical abilities that they can't analyse something like USPAP and "Comp Checks".