Appraisers' Free Forum

Steve makes a good point. I was taking Kenneth's posts as referring to competency, rather than ethics. Generally, I'd say competency is more elastic (than ethics) with respect to training.

In most areas, certification was given to whoever paid the fee and swore he'd done at least XXXX appraisals. Most of those guys haven't taken the QalEd courses, because they're more expensive and take longer.

I might have gone too far off the deep end in my last post, but the point still holds. Since so much of conventional appraisal theory doesn’t make sense, how do you build better appraisers by making people memorize, regurgitate and swear allegiance to nonsense? That’s why if we ever took this approach, which we will never take, I favor making everyone recertify by taking the Uspap instructor’s exam.

Take one example of nonsense. I see in plenty of books assert that super adequacy causes a loss of value. Really? Never seen it. Super adequate property that makes $2 sells for more than adequate property of the same type that makes $1. In one of the SREA texts, the discussion attaches values to an example. In the example, the super adequate property is worth three times as much as the adequate property. So, where is the loss of value?

And this is what you think people need to be tested in to be sure than know how to figure out what things are worth?

I can't recall ever reading or hearing that a superadequacy causes a loss in value to the property as a whole. The loss in value is to the superadequate component of the whole. My understanding for the past 17 years has been that a superadequacy, by definition, adds some value to the whole.

But if you are referencing an outdated text which does not agree with modern theory, doesn't that support my previous comment regarding the problem of highly experienced appraisers not keeping current with modern thought and practice? Using your suggestion that appraisers pass the USPAP Instructor Course, should the Course be the current version or a pre-2006 version? Wasn't there a recent post on one of the forums about a highly experienced CG making reference to the Departure Rule in a recent report?

I agree that there are aspects of the exam which test "textbook" examples and ignore the realities of actual practice. I acknowledge that the suggestion has its weaknesses. But, in comparison to an enforcement action which merely requires that an appraiser take a class on, say, the SCA, wouldn't a requirement to take the current National Exam be a more effective corrective action given the previously identified availability of less than quality education providers?

This whole discussion revolves around the difficulty of the current National Exams, the high failure rate of the exams, and the role of inadequate education in that failure rate.

Kenneth Brown wrote:I can't recall ever reading or hearing that a superadequacy causes a loss in value to the property as a whole. The loss in value is to the superadequate component of the whole. My understanding for the past 17 years has been that a superadequacy, by definition, adds some value to the whole.

Whew. Case and point, Pina.

Interesting to note, you are telling me your recollection and undrstanding, but are not quoting the kinds of sources I referred to. I think what you did there is use your own rationality and intelligence to improve faulty theory you almost surely were taught. You say 17 years? You are an SRA? Maybe you got that from the SREA before they were taken over, in which case you might well have used the SREA dictionary, from 1984, page 114
"functional obsolescence...reflects the loss in value brought about by such factors as defects, deficiences, or superadequacies."
See? "Loss in value [is] brought about by superadequacy."

See what I am getting at. Faulty theory. That is, someone would be making you go back to pass a test showing you can memorize and regurgitate what common sense and 17 years of practice tell you is flat wrong.

I have no argument with your points and I think we are more in agreement than not.

With regards to the SRA, I suppose I am not a "real" SRA, as seemingly defined by a certain party on another forum, but rather nothing more than a carpet-bagging RM wannabe SRA. I never had any relationship with the SREA.

I don't have any SREA texts, but the AI text "Appraising Residential Properties", published 1988 and revised 1992, page 287, indicates superadequacies are "structural components of a higher quality and cost than are required under current market standards"...and..."the item may contribute less value than its reproduction cost." On page 271 of the same text, functional obsolescence, along with physical deterioration and external obsolescence, reduce the value of a structure in comparison to its RCN.

My documents from AI's "Residential Case Study" course, dated 12/4/92 and taken in early '93, reports depreciation is "a loss in property value from any cause; any difference between reproduction or replacement cost and market value as of the date of the appraisal." I handwrote a note adjacent to this statement that reproduction or replacement cost is cost new. Included under the discussion of depreciation is functional obsolescence.

Not knowing the context of the statement you reported from the SREA text, I cannot comment upon it. But if there were no clarifying statements that that the value it refered to was RCN, it would seem to be an incorrect statement.

So, maybe there is something to be said for AI after all! Sounds like they got it right when perhaps others did not. :)

Kenneth, you are talking about me....and I thought we had already worked this out.

Corporate Lackey wrote:Kenneth, you are talking about me....and I thought we had already worked this out.

No I am not and I agree we worked this out.The forum I referenced is not AF. And the "issue" on the other forum is not the demo alternative, but AI vs. SREA/Commercial vs. Residential. There is a "real" SRA (as awarded by the previous SREA) who seems to think that AI does not have the moral authority to award the SRA designation. Oooookay....

Ahh, okay (whew, thought we had to go to the mat again). The AI has got to get off it's freaking high-horse with regards to commercial appraisers having a clue and residential bastards just being that. Makes me sick!

BTW, I joined back in the Society days and there was a lot of regard for residential back then. I think a lot of the disregard has come about due to licensing and the bar to entry being lowered to every GED card carrying burger flipper....ooh, my bad (should be nicer, but then I am not on the other forum)

Sounds like we are due for a new thread regarding the infighting between residential and commercial appraisers.

For the purpose of qualifying my position only, I can state that I was a residential appraiser from early 91 to early 07. I took Basic Income Cap in late 02 and at that point started to really realize just how much I did not know about appraising. Since then, I completed all of the MAI required courses and also took formal graduate level courses in real estate at Virginia Commonwealth University. I have been a full-time commercial appraiser since early 07. I have some observations on the whole residential versus commercial topic which some residential appraisers may not appreciate.

I fully agree with you about the problem of lower entry standards for residential appraisers and the effect that has had on the reputation of residential appraisers, as a whole, within both the appraisal community and with the public at large. When I moved to Florida last year, I was required to retake the 15-hour National USPAP class due to the length of time that had passed since I had previously taken it. For convenience and time purposes, I took the course through a local real estate/appraisal "academy." To state that the class was full of misfits and dumbasses would be too kind. There were about 40 people in the class and, out of that number, perhaps 2 or 3 that number seemed to have their act together. And, of course, there was more than a handful that thought, for some reason, that just because they were taking the diploma mill courses, someone owed them a job.

But that is another topic entirely.

Corporate Lackey wrote: The AI has got to get off it's freaking high-horse with regards to commercial appraisers having a clue and residential bastards just being that. Makes me sick!

In my, so far, short stint as a CAR I have reviewed residential appraisals done by Cert General appraisers. Quite frankly, many -if not most- ought to stick to commercial work because their residential reports are the pits.

As far as I can tell, there should be a license just for commercial and one just for residential. They appear to be two distinct areas of expertise.

And please don't get me going on the the appraisal organizations. I joined NAIFA almost a year ago and am far from impressed. May not renew.

Kenneth Brown wrote:I have no argument with your points and I think we are more in agreement than not.

I am not sure. If you agree that much of the "appraisal theory" that is forced down the throat of beginners doesn't makes sense and wouldn't hold up to reasoned scrutiny, therefore it would NOT behoove the profession to force people who forgot the nonsense to re-learn it for a test - then we are in substantial agreement.

That said, I suspect that we have not reached on agreement on the fact that appaisal theory erroneously holds that super adequacy causes a loss of value.

From the AI Dictionary
“Incurable functional obsolescence…caused by a deficiency or superadequacy.”

From Henry Harrison
"Incurable functional obsolescence...loss in value caused by a deficiency or by an excess or superaqdequacy."

From Betts/Sly, "Basic Real Estate Appraisal"
"However, the value loss suffered by a misplaced improvement or overimprovement is usually considred incurable functional obsolescence."

Parts or all of the "reasoning" are in many books, but not any of the ones I rate as "good" or better.
1. Super adequacy or overbuilding is a form of functional obsolescence.
2. Functional obsolescence is a cause of depreciation.
3. Depreciation is a loss of value.
Therefore, for those who can operate a syllogism, super adequacy causes a loss of value.

So, back to my original point, it wouldn't do much good to make people re-study and re-test on material that is bogus. In fact, I would go further now to say that not only is this type of dis-education not a cure, it's part of the problem.

If you are going to take definitions out of context, you can prove anything.

From the AI Dictionary:

"incurable functional obsolescence. An element of depreciation; a defect caused by deficiency or superadequacy..."

"depreciation
1. In appraising, a loss in property value from any cause; the difference between the cost of an improvement on the effective date of the appraisal and the market value of the improvement on the same date."

While perhaps not stated in concrete terms within the definitions, the loss in value relates to the RCN, not the depreciated value. While not specifically stated, the reference to the difference between cost and market value leaves no other logical conclusion. To state that the loss is in addition to the depreciated value is nonsensical as the depreciated value considers value loss from all sources.

Are we slipping into a CA discussion? I know better than to go there with you. It's a hopeless quagmire.

Kenneth Brown wrote:Are we slipping into a CA discussion? I know better than to go there with you. It's a hopeless quagmire.

I've had my bought with PC - so therefore, I can easily and happily say:

However, I always feel like I learn something when we had some of those or I watch him with someone else.

Kenneth Brown wrote:Are we slipping into a CA discussion? I know better than to go there with you. It's a hopeless quagmire.

I am not talking about "an approach." However, I accept your surrender on that matter.

If you are going to take definitions out of context, you can prove anything.

I didn't take anything out of context. If you want, I'll quote another another half dozen sources that explicitly state that superadequacy is a loss of value.

While perhaps not stated in concrete terms within the definitions, the loss in value relates to the RCN, not the depreciated value.

So, you are telling me all those books say superadequacy creates a loss of value, but they didn't really mean it.

I don't want to lose track of the conversation here, but I get the impression that after saying we are in agreement, that you are trying to contradict me about appraisal theory sometimes being a confused mess (and a confused mess on this particular issue). That's fine, but if I follow, you saying that all these textbooks said one thing (loss of value) meant another (loss of cost) and the truth about superadequacy is yet something else (likely gain in value). So, while I feel I am being contradicted (amidst accusations of taking things out of context), I believe you just proved my point that the theory makes no sense.

"depreciation
1. In appraising, a loss in property value from any cause; the difference between the cost of an improvement on the effective date of the appraisal and the market value of the improvement on the same date."

Well yeah. It's ambiguous, at best. The books sound like they are citing the first defintion, but you are telling me they meant to cite the second. Who knows, maybe the authors would disagree. Some of the books go on to suggest calculating obsolescence by capitalized rent differences and paired sales - which sound like me to gains and losses in value, not gains and losses in cost.

Were you stating that appraisal theory can be a confused mess? I don't necessarily disagree.

With regards to this particular topic of cost and value, perhaps the confusion is a result of what the definitions expect the reader to infer. For example, I do not infer that the above definition of depreciation contains two definitions. Rather, I read the semicolon to indicate the second portion of the sentence expands upon the first portion of the sentence, Together, the two sections create a single description of the term.

Perhaps the confusion is a result of the use of the generic terms "cost" and "value". Does "cost" refer to RCN (which has been my, perhaps inferred, understanding and the reason for the handwritten note in the margin of the course material previously described), or does it refer to depreciated cost. By "value", are we discussing market value, value in use, insurable value? Perhaps at the most basic level, further clarification would be too restrictive. It think someone made a reference recently to the story of the blind men and the elephant. One must see the entire beast to understand what it truly is. If one just examine portions of it, the description of that portion would not describe the whole.

Perhaps a lot of the confusion is created when people start qualifying basic theory with "what ifs" and/or "buts."

But I understand that confusion, actual or created, can result in productive discourse. Productive is the key for my involvement. Never-ending circular semantics aren't my cup of tea. Not that they can't be someone elses.

For example, I do not infer that the above definition of depreciation contains two definitions. Rather, I read the semicolon to indicate the second portion of the sentence expands upon the first portion of the sentence,

At the risk of engaging in non circular productive argument, that is a distinction without a difference. Whether we recognize your quoted passage as two conflicting and different definitions, or we “infer” them to be one ambiguous definition that can be manipulated, the bottom lines don’t change.

What happened now, is a second layer of confused theory is obfuscating the first.

I think it would be obvious to anyone that defintion 1, loss in value (V2 – V1), is not the same as defintion 2, a loss in cost (C - V1). Remember the environment controlled by a principle that says C is not V. So calculations based on C (losses to cost) should not be referred to as calculations based on V (loss of value) - nor should they be expected to produce the same results. To make a pet analogy, the "inference" is like a guy who thinks he lost his cat, but reports that he lost his dog (because he “infers” some ambiguity in the definition of mammal). Whereas my point is that any reasonable person would see that Pet Theory doesn’t make any sense.

What I don’t want to lose track of, is that this secondary layer of confusion is obfuscating the original layer. Let me give you an example similar to one used another forum where I was roasted with various personal innuendos by the same type of person who would impugn the pedigree of your SRA. The example was based on a neighborhood of $500k to $600k houses. A person is spending $1 mil to overbuild a super adequate house that will be worth $800k when finished, and is worth $800k when finished.
- Using definitions 1 (V2-V1) – “a loss in property value from any cause” – “the” depreciation is zero.
- Using definition 2 (C-V1) - “the” depreciation is $200k.
- Using your “inference” V2 in definition 1 really means C, so “the” depreciation is $200k
I was roasted for asking what loss in value. The house is worth $800k, and it is brand new, and it was never worth anything else.

So, this secondary layer of confusion
- whether “loss of value” is zero as I contend or whether the loss of value is $200k under what I believe is secondary nonsense theory that confuses cost with value -

is obfuscating the original confusion, which was based on the idea that there is no “loss” but a gain of value. That is, the overbuilt and super adequate one is worth more. In the example the overbuilt one is worth $200k-$300k gain in value over the neighborhood norm.

Do you see what I am getting at? You started out agreeing with me that there would be a increase in value, and ended up defending certain books that say there would be a loss in value. And from that, you infer that I am the one going in circles.

And remember the context, your argument that people who make enough errors should be retested. That's what makes my antenna go up. In this environment, how do you define error - getting the nonsense theory right and the value wrong, getting the value right and ignoring the nonsense theory? I think damage is done forcing someone to memorize and regurgitate nonsense, and that no damage is cured making them do it twice.