Have you read a few good books lately? Perhaps all of us should read a little more. When I was teaching the Housing Market Analysis class at the "a la mode regional conventions", I would ask the audience, "how many of you have read The Appraisal of Real Estate"? To my surprise (and shock) at several locations, only a few hands were in the air.
For the many years I have been in this profession, most I know have always considered "The Appraisal of Real Estate" as the "bible of appraising" and perhaps the most definitive and authoritative source on appraising currently in print. That's not to say that there aren't other good appraisal books out there, only to make a point. Many of those in the profession have yet to read and study the most widely referenced book on appraising.
If that is the case (and I have no reason at this point to believe otherwise) would appraisers have a better understanding of the principles, techniques, applications, etc. (outlined within The Appraisal of Real Estate) if they did? If The Appraisal of Real Estate was "required reading" for appraisers, users of appraisal services, underwriters, loan offices, agents and others, would some of the issues fade away?
For the URARS addendum, should we have a section that lists key references by title and edition? If so (and given the number of books and publications available), how much is enough? Should we limit the list to several that are comprehensive or should a few specialty references be added? Listed below are a few of my choices. What other publications (they must be in print and widely available) would you suggest or is this list adequate?
REFERENCES GENERALLY ACCEPTED APPRAISAL PROCEDURES & TERMINOLOGY
The Appraisal of Real Estate- 13th Edition. Perhaps the most authoritative and recognized publication on real property appraisal principles, techniques and procedures.
Dictionary of Real Estate Appraisal- 4th Edition. A comprehensive industry standard for terminology and definitions.
The Essentials of Real Estate Economics– 5th Edition. A straight forward guide to understanding markets, neighborhoods, supply and demand, and the factors that affect them.
ANSI-Z765-2003 Single-Family Residential Buildings - Square Footage - Method for Calculating – Describes the procedures to be followed in measuring and calculating the square footage of detached and attached single-family houses. (See qualifying statement for local custom in the Clarification of Scope of Work section).
Since the URARS is intended to be a "uniform addendum", whatever we reference should be acceptable by all (or at the very least, a large majority). Another reason for keeping this a "short list" is that logically speaking, few professionals (appraisers or others) could argue with these choices.
The Appraisal of Real Estate has been around for 57 years, while the Dictionary of Real Estate Appraisal and The Essentials of Real Estate Economics were both first published in 1975. ANSI Z765 was a result of a collaborative effort with the National Association of Home Builders and first published in 1996. Essentially, the list has "widespread acceptance" and a "solid pedigree".
Molding "flexible stone"
This brings me to an interesting point. Should the list be "carved in stone" or should there be some "flexibility"? Several have written to me decrying ANSI Z765 as (at times) being conflicting with "local practice". Strict interpretation (for some types of properties) would yield "no above ground square footage", hence a potential issue.
If that is the case, perhaps we should add a "qualifying statement" to the ANSI reference above and to ANSI in the COSOW section, whereby the appraiser is using ANSI Standard Z765-2003 for general guidance as to what is and isn't living area (conditioned space) and for point of measurements, however final determination of "above ground living area" is based on ANSI Z765-2003 with consideration to "local custom" for the purpose of comparison in the Sales Comparison Approach.
Other potential issues with ANSI are the standard for measuring to the "inch or tenth of a foot" and rounding to the nearest foot. Many appraisers prefer to round to the ½ or ¼ foot, some to the foot, etc., so we are asking all to conform to a "single standard". Again, adoption of ANSI could have a "qualifying statement" to indicate ANSI as a "general measuring guideline" and the specific method used would be addressed in the COSOW section.
When I originally proposed the URARS (as GAAP on the forums), Charles Baker had suggested we include a section for the appraiser to list "departures from standards" and "the appraiser's support for those departures", something I'll address in future articles as we move through the potential issues. It is a good point, as the URAS must provide "uniformity" and also incorporate "flexibility".
As I said, "compromise is needed". The key here is to provide a basis for the general standard and to communicate to the user, reader, etc., that while some minor departure from that standard has been made (for reason of local custom, comparative purposes, etc.) the fundamental standard is in place and its application was consistently applied to the subject and the comparables used.
For the most part, the problems identified in appraisals are less a result of departure from a standard, technique or application, but rather reside in communicating and documenting the logic for those departures in a manner that is supportable as and reflects "the actions of our peers".
One last observation, "if we adopt the list (as it were), all would need to read those books and have them available as a resource". Is it "misleading" to state you are following a method, definition, technique or application you have never seen nor have a reference to?
Up next – The URARS Part Six: "De facto Standards – Neighborhood Section of the Uniform Residential Appraisal Report"
AUTHOR: Patrick Egger is a Certified General Appraiser located in Las Vegas, NV. He teaches continuing education classes on the housing market, appraisal issues for real estate agents and appraisers. He can be reached at email@example.com Look for the new Outside The Boxes category for a collection of Patrick's articles on Appraisal Scoop!