A friend passed along the following story with a cute punch line. It reminds me, however, of a more serious thought, one I spoke about at our seminar on Wednesday, Appraising In A Changing or Declining Market.
As licensee's what is expected of us from the public, the users of appraisal services and their investors, mortgage insurers or regulators? If you read and understand the Preamble to USPAP, the Ethics and the Competency Rules, along with the Mission Statement of your License Board, and the Appraisal Foundation; one is left with the feeling that a whole lot is expected and assumed about us and about our behavior, about what is contained in our reports.
Before I share the story, open your mind to the concept that there is an expectation that the public and users of appraisal services have about the truthfulness and reliability of our work. If we function as Advocates instead of Neutrals, that trust is violated.
If the market is going down and we say it is stable, we are violating that public trust. If the property is in Poor condition and we call it Average-Minus . . . .etc.
The kernel of the Socratic Method is one of questioning. I was first aware of it in a college course on Philosophy. It was made famous in the 1970's TV series The Paper Chase in which the crotchety old professor, played by John Housman, would ask one question after another of his student's, digging deeper, plying the depth of their knowledge, etc.
As licensees, the public, by virtue of hour our function is defined, by USPAP Ethics and Competency Rules, has the right to believe our reports are truthful, accurate, correct. They have no reason to expect the report might be biased to favor the client who paid the fee, the cause of the client, the approval of a loan a predetermined value, etc. In fact we certify that we have not done any of those things, certify that we functioned in an unbiased and objective manner.
This week alone, in my office we have seen situations where the accuracy and veracity of the appraisal was on the face of the document seriously questionable. The issues ranged from:
- reporting a property to be in a City that it was not in,
- to misrepresenting the Market Trend as Stable when it has been Declining for 10+months,
- to misreporting the Zoning where the house was on commercial and the report stated residential,
- to misrepresenting the value by improper Scope of Work,
- to inappropriate market data selection,
- to lack of data verification and meaningful analysis.
We use the Socratic Method in our office, in our original work product and when we provide review or consulting services and expert witness rebuttal testimony. Building a reputation of being known to be Neutral is our goal. We have been working on this for a very long time and have evidence that we are in fact viewed by our clients as just that. We take no assignments with a predetermined value, none, period. We do not advocate for any client when performing the role of an appraiser. We do when hired as a consultant, as in a Tax Appeal case.
We need to ask ourselves many questions and obtain many answers to do our job. Or Not. Providing reports for clients and the users of appraisal services is an information intensive function. The accuracy and veracity of the reports cannot be maintained if we operate on automatic pilot. Using a Template to speed up the process, may create liabilities in a changing market if the market is going down.
We need to examine, question our behavior and do a risk assessment. Each report carries up to a 7-year life, a liability trail for the appraiser. That is, the oldest report I have ever heard of an appraiser being sued over, was 7-years old.
We need to question the data we are relying upon, make sure it is bonafied, accurate, true and correct.
We need to verify the terms and motivations, and deduct the concessions or cash-back or sweeteners in deals and make appropriate deductions. Would any of use knowingly use a phony sale, a fraud comp? Would using one unknowingly impact the value conclusion any less?
Questioning the data is the essence of what we need to do in this market. Knowing we are using good data that we understand the motivations of the parties, terms and conditions; will become more important that just the physical details of the sale property. The following story is a cute example of the Socratic Method, in this case it is applied differently. Think of how it could be used in appraisal work . . . .
The Socratic Theory;
Keep this philosophy in mind the next time you hear or are about to repeat a rumor. In ancient Greece (469 - 399 BC), Socrates was widely lauded for his wisdom. One day the great philosopher came upon an acquaintance, who ran up to him excitedly and said, "Socrates, do you know what I just heard about one of your students...?"
"Wait a moment," Socrates replied. "Before you tell me, I'd like you to pass a little test. It's called the Test of Three."
"Test of Three?"
"That's correct," Socrates continued. "Before you talk to me about my student let's take a moment to test what you're going to say. The first test is Truth. Have you made absolutely sure that what you are about to tell me is true?"
"No," the man replied, "actually I just heard about it."
"All right," said Socrates. "So you don't really know if it's true or not. Now let's try the second test, the test of Goodness. Is what you are about to tell me about my student something good?"
"No, on the contrary..."
"So," Socrates continued, "you want to tell me something bad about him even though you're not certain it's true?"
The man shrugged, a little embarrassed.
Socrates continued, "You may still pass though because there is a third test - the filter of Usefulness. Is what you want to tell me about my
student going to be useful to me?"
"No, not really..."
"Well," concluded Socrates, "if what you want to tell me is neither True nor Good nor even Useful, why tell it to me at all?"
The man was defeated and ashamed and said no more.
This is the reason Socrates was a great philosopher and held in such high esteem.
It also explains why Socrates didn't find out that Plato was seeing his wife.
AUTHOR: Steven R. Smith, MSREA, MAI, SRA, Smith Realty Advisors, 936 San Jacinto St., Redlands, CA 92373, Real Estate Appraisals, Consulting, Expert Testimony, Forensic Reviews, Fraud Research and Analysis, Litigation Support, Fraud Training 909-798-8855, fax: 909-798-0139
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