Should Appraisers be Using Regression Analysis Tools?

What is a regression tool for appraisers?  In layman’s terms, it is a way to take statistical data and boil it down into a readable format.  It is one thing for an appraiser to say the market is decreasing, increasing or stable, but can they support that comment beyond a gut-feeling?  Regression analysis can help.

I know what you are thinking, “but Dustin, that is just more work.  On top of everything else the AMCs are now asking for, do I really have time for one more step in the appraisal process?”  It is a great question, but I would look at it differently.  Regression analysis is not just one more step in the appraisal process.  Instead, it very much is integral in appraising.  It should be done on a regular basis (if not every time you do an appraisal), so why not make it easier by using some of the excellent tools that are currently available?  As professionals, we should not be guessing at market trends or how our particular subject property will react in the current housing environment.  To do so is faking it, and professionals don’t fake it.

I have tried a great number of regression tools and my experience has so far been less than impressive.  As you know, I live in an area where tumbleweeds and cows outnumber people.  Homes are built fairly far apart and statistical sampling can be difficult.  That is not to say it is impossible, and even a rough statistical analysis is usually better than none at all.

Furthermore, a greater number of big lenders and AMCs are requiring some sort of computer analysis to back up our opinions as Appraisal Regressionappraisers.  Though some in our profession might push against this, I would not be so hasty.  These reports are not always accurate or even needed, but they often provide just a little more evidence to back up what you are reporting anyway.  There have been times when I have taken a ‘close to the trees’ look at a market and thought I knew what the trends were.  Then, I pulled back to view the ‘forest’ using regression tools only to discover the Hundred-Acre Wood was not quite what I thought it was.  This kind of realization can change everything in an appraisal report.

I am not going to promote just one product here.  There are many to choose from.  Some charge a flat fee and others a recurring one.  Find what works best for you, but be careful.  Often, you get what you pay for.  There are some tried and true tools out there and some newcomers to the market.  I am not saying the newbies are bad, but do your homework.

Now, go create some value!

60 thoughts on “Should Appraisers be Using Regression Analysis Tools?”

  1. I believe you are trying to project a level of sophistication that you are incapable of achieving due to the uncertainty of the dollar. It looks good, but so does all of the advertising material of Washington Mutual and Countrywide before their world collapsed. Many of us believe that the current market is only temporary at best and can fall off the cliff at any time. For us to add information that appears to be relevant but in the big picture is entirely irrelevant IS MISLEADING. Appraisals are sometimes like governments because “bigger is not better”, sometimes “keep it simple, stupid” is appropriate. LENDERS DO NEED TO BE REMINDED THERE IS RISK INVOLVED AND THAT THEY HAVE TO CHOOSE TO TAKE THE RISK NOT THE APPRAISER. But thank you so much for your opinion, and I look forward to reading more in the future.

    Sincerely,

    David H. James

    David James Appraisals, Tennessee & Mississippi
    9550 Daly Drive
    Lakeland, TN 38002

    1. Roy Wright, SRA

      Good morning
      I have been using Linear Regression in my residential appraisal reports for the
      past couple of years. I have recently written a seven hour program to teach
      appraiser how to us Excel in the appraisal process. This program has been
      approved by the state of Oregon for continuing education.
      Regression analysis provides us with an objective support for our adjustments
      were as paired sales analysis is a subjective support.
      Regression analysis takes no more time then paired analysis. Regression analysis
      Is about providing a measure of confidence to the final value estimate. Regression Analysis
      Is infinitely superior to paired sales analysis. Change is not easy but, it can be rewording.
      Respectively Submitted, Roy

      1. Roy,
        Your credibility would be be greatly enhanced by using proper grammar and spelling. Just reading your post, I was very distracted by the numerous errors I saw:
        APPRAISERS not appraiser
        USE not us
        WHEREAS not were as
        THAN not then
        REWARDING not rewording
        RESPECTFULLY not respectively
        The comma goes after “easy,” not after “but.”

        Also, I do not agree that paired sales analysis is inferior to linear regression, as you say, or that it is less objective.

        1. We English majors don’t get no respect. My advice would be the opposite; if you want to sell something on the internet, you’d better get off if you can’t spell, because it just makes you look dumb and destroys your credibility. Chances are that people who CAN spell and use appropriate grammar will not buy the product.

      2. Good Morning….

        Most appraisers do not have the education to properly apply linear regression. What they are doing is taking sales data and implying accuracy that is not there. I forget what the number of data points is needed to justify somewhat of a reliable adjustments, but its in the neighborhood of 20 to 30 per item. So for a residential property, that’s impossible as the sales should come from the population or subdivision. If you use just sales from the overall market that is meaningless and only offers some minimal justification if any as the subject’s population was never studied nor could it.

        So why make and unsupportable adjustment when you have the cost approach and or income approach which is far more reliable. In fact, it would be a violation of USPAP to improperly employ the linear regression analysis as is being done. It also makes a big statement as to the lack of qualifications in the appraisal industry and why appraisers are not needed. We need to do what we were paid for and it starts by getting the education. Simply employing excel under false premises is a violation of USPAP.

        Dave

      3. Hi Roy, I’m in the process in changing my appraisal models/regression analysis and I am interested in looking at the work of others, to see if they can offer any improvements. Do you have a video or manual to sell? If so, please let me know.

        Eric R.

    2. Michael Mathis

      So I assume that David James’ position is that all of this is too complicated for my poor little appraiser brain to figure out, so therefore I don’t have to include it if I explain that it could be misleading. Wow, amazing!!!! Do you use the same excuse to justify not including a sketch, since rounding errors could affect accuracy? You could apply that same pathetic logic to I don’t define neighborhoods because different people would give different answers (is it major thoroughfares, natural physical boundaries, school districts, cities, counties, etc.); so again do you skip this one? So how do you decide if the market is appreciating, stable or declining? Darts? Hell, you probably still use paired sales to determine amenity values and think you are doing it right. And obviously, you are still typing your reports, albeit a hunt and pecker. I hope the disdain for your lack of professionalism under the phony umbrella of conspiratorial ignorance is clear. Coach got this one, only he was not strong enough. Regression analyses and/or other statistical tools should be used throughout EVERY report. Those who don’t are dinosaurs and should seriously think about becoming real estate agents.

      1. Hello Michael, I do not disagree with your statement, but there is no need for a personal attack on Mr. James. You don’t have to be sarcastic, rude, or mean. Just state your point, as in a civil conversation. You would have a much better chance of reaching him, and others that think the same. You have created a hostile, impersonal relationship. There are only a few of us appraisers out here, we need to help one another, not insult each other.

        1. Hi Ed, absolutely agree. Pretty caustic and unwarranted comments.
          RA can be a good tool, though I to have not used it (yet) for SFRs. I DO know my state BREA thinks its the new sliced bread of documentation so if for no other reason that including it in work file data, it makes sense. The ones I tried (practice only) also indicate a sampling of less than 200 is statistically meaningless. so in most cases it would cover my competitive marketing area, though not necessarily a given neighborhood. Another comment in the instructions was to insure the subject property type is being bracketed by data. ie: for a three bedroom comparable, I want to analyze twos, threes and fours. Same with baths. In my area we have many transactions, but 200+ don’t normally show up in either commercial data services OR mls. I think both are limited to around 100 sales.

          From what I read though, LRA would NOT be good for completing the 1004MC since that only wants ‘competitive’ property, and not necessarily data from non competitive properties that would be necessary for inclusion in regressing analysis. Am I on track, or missing something?

          1. From what I read though, LRA would NOT be good for completing the 1004MC since that only wants ‘competitive’ property, and not necessarily data from non competitive properties that would be necessary for inclusion in regressing analysis. Am I on track, or missing something?
            Thanks for the above post-
            You are absolutely on track…and if statistically not significant, adding regression analysis OR ANY of a slew of statistical methods, would be misleading, and needlessly clutter most 1004’s…it requires much more appropriate data than we typically are provided. makes us look like pretenders.
            but I have a doctorate that required me to teach probability and statistics…what do I know?

        2. Michael Mathis

          Ed, the encouragement to be nice to a peer is valid; however, my point is that he is not a peer. His comments are not progressive and the profession needs to eliminate lazy, thoughtless appraisers who work like him. The number of times I see valid deals squelched because some pompous, moron with 20 plus years experience (the first year repeated 20 years in a row) fails to accurately analyze his/her market and therefore fails to perform a valid appraisal galls me. This guy and others like him are taking money for something they are not either qualified to perform or willing to earn. Would you be so kind to your peer if it was a doctor practicing medicine using 1970s standards? I hope not. I would not, nor will. It is time to raise the standard and calling out this kind of appraising is the first start.

          1. Always nice to find the smartest appraiser in the room. Unless you have personally reviewed Mr. James appraisal work, you are not COMPETENT to provide ANY opinion on the quality of it. Do a little regression analysis on that smart guy.

          2. Michael Mathis

            Jim, if there are massive amounts of smoke coming from the house, something is on fire. A rash of poor logic to justify failure to perform BASIC ADEQUATE work based on 2014 standards doesn’t require a rocket scientist, or even a review appraiser, to be recognized. Maybe his work was good in 1970, but not today; and the discussion is today. And by the way, Jimmie, one cannot do regression analysis on a sample of 1, slow guy.

          3. Mathis, you have no credibility as to real estate, whether it be appraisal, investment or otherwise. I read your story in the LA Times. Care for me to reprint is for the folks here? Didn’t think so. Now quit acting like you are some sort of authority on anything.

      2. “Hell, you probably still use paired sales to determine amenity values and think you are doing it right.” What method are you actually using on a day to day basis? Just wondering…

      3. Michael, I agree with Ed Woodruff below, that was a personal attack, and apparently some other people below know you and do not care for you either.

  2. Dustin,
    I use a very good program to gather the MC data in my market. I have not seriously looked into regression analysis. Is the main difference between MC data and regression analysis that MC is historical data which reflects prior to current market conditions versus regression analysis using prior to current data to project trends into the future? Please digress if you feel so inclined. I totally agree with your statement that my initial feelings regarding regression data is that it’s just one more thing! The scope of work goes up while the fees decline!!

  3. I agree with Mr. James – especially in a rural area. Whenever I perform the 1004MC addendum I specifically make the following statements in bold: 1) that it was done at the request of the client; 2) that due to insufficiency of data the results are potentially misleading and should not be relied upon; and 3) that the results of that approach to value have not been taken into consideration in the estimate of value. Regression analysis? In a homogeneous urban area, maybe. Anywhere else, it is shiny toy that breaks after first use. As Mr. James noted, in the case of lender driven assignments, risk assessment is inherent the purpose of the appraisal. Anything that undermines that purpose is inappropriate. Pointing out the fact that statistical analysis is not credible or reliable due to insufficiency of data is an important statement in the report which assists the lender in calculating risk.

    1. I use similar disclaimed for 1004MC and most times wind up using other, more reliable data in my URAR neighborhood conclusions; and SAYING so. I may be required to go through the motions of 1004MC, and once in awhile it even appears reliable (cross checked against other sources),. When I is not as accurate or reliable, Im not bashful about saying so, and explaining other sources used instead.

  4. Hi Guys, Regression is not a new thing. Its been around for a long time and is not “just one more thing” It is a great tool for deriving adjustments when you have enough data. It is also a good tool for proving the trends you are reporting. You have to ask yourself. Do I have the work file to back up my claims? Without supporting data, that’s all it is. If you are familiar with excel it is not all that difficult., Most MLS systems allow you to customize a downloadable format you can plug right into excel. After an initial set up, it takes minutes. Its not necessarily something you need to do for every assignment. Save your work and add to it every few months. Before you know it you will have an abundance of market trends data. BUT REMEMBER garbage in -garbage out. Use your judgment for what’s reliable data and what is not. Get familiar within guys, you cant have to much support!.

  5. My appraisal company uses regression analysis in every appraisal report to support all kinds of adjustments. It does not always work; but, we try. Here is a video that I made on the topic: https://www.youtube.com/watch?v=Sk4kB_9gGMA&feature=share&list=PLpdY10imMqWMbWCCd7stYNmORoTW1xwUp&index=6 . If you ask an engineer to answer a question, they will answer in terms of statistics. Statistics are the language of science. If we don’t step up as a profession, AVMs will pass us in accuracy. I know what you’re thinking, an AVM cannot pass us because they do not know condition, quality, etc… However, you can send out a minimum wage worker to input into the computer these factors in quantifiable terms. Once a computer knows these factors about the subject and comps, all it needs is regression to produce appraisals that are far more accurate than appraisers are doing today. On top of that, an AVM can answer like an engineer and say with a mathematical confidence interval that this is the value of the property.

    1. Regression analysis is NOTHING more than another tool an appraiser MAY use to provide a CREDIBLE report – PERIOD! A carpenter has a multitude of tools in his arsenal of which some may only be used on occasion and if necessary because THE CARPENTER knows his job and that tool is currently required. As far as a “Gut feeling” for stable, declining or increasing is exactly what put us in the position as appraisers that we are. We are required to be able to pull our file and or include in the report the data to PROVE support for our determination. Most appraisers do not – hence another reason for the variance in acceptable fee’s between appraisers who do a good appraisal and are paid accordingly and the appraisers who fill forms in hopes that they never get called to the carpet by the licensing bodies of our profession. Gary Kristensen implies that AVM’s have the opportunity to do away with appraisers. That will never happen in all areas. The question is – Does your work level and geographical area of expertise qualify you for surviving the AVM, AMC, and the mortgage payment?? We are just another tool as are avm’s and guess what – we are in the Lenders/amc/feds tool belt. Like it or not everyone is in someones tool belt for some reason. Enjoy your job or get another one!

      1. I agree with your assessment of the situation. It is a tool you can use to support your opinions, but I work in rural areas with little data within the neighborhood. I like the statements to protect myself, but what I use regression analysis for is to take information from a broader area to support the market trends. To use the neighborhood would never generate enough data to develop a trend. I don’t worry about surviving and provide a credible report. I support as much information as I can either through charts, stats, or pictures. What is frustrating for me is when you do it right and show underwriters what needs to be done with repairs, condition, or market it creates more work which you cannot get any additional fees for. Its a great job, but we should be paid for doing it right.

    2. Hello Gary, I do agree with you, and I use regression analysis in my work, but I had to laugh just a little bit about the phrase “Statistics are the language of science”. I was always taught that “appraisal is an art, not a science”. It always gets to me when someone refers to our work as science, almost as much as when someone refers to what we do as an industry, and not a profession. We are professionals, performing a professional service; there is an art to what we do. We are not industrialists, mass producing works of science, though we do use science in order to produce our art.

    3. Gary, dream on re RA being more accurate than an appraisal today. You cannot simply send out an untrained (or even reasonably trained) non appraiser to judge location, quality, condition, externalities, market bounds, neighborhood land use mix, degree of views etc. unless they have been fully trained as an appraiser and plug it into RA data for a ‘more accurate’ product. Its been tried for decades. Look at some counties that are now rating construction quality and condition. Not even remotely close on THOSE basics, and those are County Assessor Appraisers! RA is a tool like any other. Knowing its limits and using it properly can make it a reasonably valid tool, but it is not a substitute for all other methods, and I strongly disagree that it is better that real paired sales analysis as one poster indicated.

    4. Gary,
      One thing that has not been brought up is that every UAD report we turn in is broadening and adding to the accuracy of a national database. UAD was NOT implemented for the standardization of reports in my opinion. It Is simply to build a reliable and accurate database of every property in America so that at some point that minimum wage worker will have good uniform data about the condition, quality, view, etc. to input into AVM models. By producing appraisals, we are contributing toward major changes in out industry, if not the eventual downfall. Not really related exactly to the topic here but I though I should bring this up. Good video by the way Gary.

    5. Hello Gary Kristensen,,

      Just seen your post and though I agree with some of what you are saying as well as many of the other post. Especially those that are oriented toward “regression analysis is just one tool out of many that can be used to help provide a credible report”, “the appraiser needs to be experienced enough when to make a disclosure about when it may be misleading, especially in the case with limited data like rural market areas and keeping the analysis on a specific neighborhood”, “regression analysis best use is for forecasting larger market areas or regions and not so much smaller rural neighborhoods or even for individual adjustments unless enough verifiable data is entered”, etc. My concern though is the statement you can send out minimum wage worker to report levels of condition, quality, etc. In my opinion this is the biggest issue and flaw with the UAD set being gathered by FNMA now. It is being put together in large by some of the least experienced appraiser’s or in some cases just what I would call the paper pushers who do not complete due diligence in order to get a large volume or work based on a low fee and quick turn time. I would like to think that these individuals are still smarter than your “minimum wage worker” and yet their data collection is being provided to the GSEs giving them the ability to justify no longer needing a residential appraisal from a trained professional who takes the time to weigh all the issues needed and use all the tools available and then provide a professional reconciliation. No to mention that condition, just one factor out of hundreds that should be reviewed by trained individual, changes. The biggest issue with this is the data being provided by appraiser’s in many cases is not correct. I have tried many AVMs both out of curiosity and in training for possible future assignments on many occasions and different models and I have yet to see anything that produces a credible appraisal report anywhere close to that of the average trained appraiser. Your comments are completely inaccurate in that AVMs will pass us by. GSE or other clientele may choose to use them fully aware of their multiple weaknesses and there is not much we can do about it, but your comments only add to their justification and could not be more inaccurate.

  6. As Kevin says regression is not a new thing that is being tossed appraisers. My “Appraising Residences & Income Property” procedures book from 1989 sitting on my shelf goes over the basics of regression. I am sure it is not the first nor the best and every principles and procedures book that I’ve read since also goes over regression to some extent.

    One area people sometimes forget that regression can be useful is in helping to support the lack of an adjustment for a feature such as a fireplace or a pool. Although these types of “upgrades” have significant construction costs, many areas do not recognize a resale value and a regression analysis of an area can be useful in justifying the lack of adjustment.

  7. I was for some reason surprised by your take on this, but I couldn’t agree more. It’s a great tool for analyzing large amounts of data, or when there is limited data. Statistics can be misleading if the statistician makes them misleading; you have to understand the different kinds of trend lines and how they work if you’re going to use them for support.

  8. Timothy Walker

    I’m in favor of RA to back up my work file especially when an AMC or outside reviewer claims to know this rural market or suggests which sales to use in a report. Being fairly new to RA I currently include written comments in every report of MLS statistics for the area going back several years. However, it’s difficult to include or rely on RA because in this rural market not only is data limited I’ve found that only 65-70% of ALL properties are associated with an MLS (meaning that ~1/3 of all sales and/or listings are private in nature). Do I just ignore the non-MLS data? No because sometimes that’s all there is. So, how would one go about merging both MLS and public record data into one meaningful result using Excel (or would including both be correct)? I realize this means a lot more work but wasn’t trained to be a lazy appraiser and the higher fees that I ask for and receive make it worthwhile. Please suggest or send/email examples if you’ve figured this this out – that would be greatly appreciated. Sometimes too much information is just as bad as not enough.

  9. jOSEPH BALDINO

    In souther California in 1977 we had a progam called mulvar. It was the first avm i am aware of. It worked great in tract areas & was not very good in area of large custom homes. It could be manipulated & because of that was dropped after 4 or 5 years. Every one of the regression programs I have seen can be manipulated to change the result. There some that are not as easy to play with, but I have not seen any that i can not find problems with. A new one emc2 is being promoted by Alamode. It need 200 sales. Even in tract areas that is a lot of sales.< so it goes into neighboring cities. I have a problem with that. When i asked them about it They refused to answer. I t is difficult to find paired sales . We need some tool or process, because we will be under more & more pressure to produce reliable appraisals that are supported by more than the appraisers experience. The comp cruncher by Bradford is probably the best regression analysis tool, but is way too expensive with the low fees we are now getting.

  10. Kevin Klosterman

    I know the future in appraising is going to be drastically different than the way most see it today. Technology is soon going to allow data to be fueled to your geo triggered tablets that will soon power your reports with comparables and everything else that sold or is available in any market however you will still drive any search you feel is correct for that specific area. You will take pictures with that same tablet that will have time and date stamps as well as being geocoded with exact place you were standing when the pictures was taken. Special lender guidelines will be automatically ported to you out in the field when the assignment requires a special picture to be taken due to waterfront, scenic or specialized properties and you will likely also be able to ask for help from the out in the field by hitting the “help” button instead of being told to go back out and take a picture or revisit the property for some unwarranted reason. You won’t have to buy forms or software anymore as they will be in the cloud and automatically updated on the fly as new changes come along. The real time and constantly updating interactive data will auto populate the forms you do use and your new role will only be to interpret and narrate reasons why you feel it’s correct or incorrect and then modified by the appraiser to be correct. I don’t see a future need to review the reports as a auto reviewer that will be driven by the appraiser who can correct or narrate what ever triggered the rules or corrections. Have you been to a doctor’s office lately? Exactly …

  11. I have been doing Bradford’s “comp cruncher” system for over two years and have done close to 500 of them. Regression analysis is the basis of that system In my opinion , it is a tool that may or not agree with the sales comparison approach I use in the same report. The more properties I can start with and the better job I do in refining that data, the more in line the result will be in comparison to my sales comparison approach. And isn’t that the same thing I can say about the sales comparison approach because the more sales I start with and the better job I do on selecting three properties and the better job I do on my adjustments the better quality my valuation will be

    We can argue the merits of RA all day but my 40 years in the real estate profession tells me that RA is going to be a require my in every appraisal within 5 years. And the quality of those appraisal will be about the same quality of today’s appraisals By that I mean is that skillful appraisers will continue putting out the same good quality appraisals tomorrow as they do today and that they did yesterday whatever tools they had or will have to use. And average appraisers will continue with average quality and poorly skilled will continue with poor quality.

    I started out with typewriter reports, poloroid photos and Uncle Sam delivering the reports to now using RA in my reports. Technology changes and we need to change with it so let’s embrace change. As much as I bitch about underwriters today and the time they make us invest on a report. I think about the time and cost of poloroid pictures that were replaced with 35 mm pictures that I had to drop off and pick the film and pictures at the local drug store. I think about how I had to stop mailing out reports which was replaced by very expensive shipments by United Parcel. I think about the trips to the county auditors office to verify things or to check the parcel books or the trips to the local govt office to check out the zoning. There are a lot of other time consuming things I had to do them that I don’t now. Again, embrace change. It may make your job easier

    1. Denny, since we’re not in the same area, I’d be interested if you would share your RA template. I’m returning back to practice after few years as a bank reviewer of mostly commercial property and am looking for samples of what folks use. Thanks. robertfelderman@yahoo.com, 563-213-0398.

  12. I generally do not like posting on blogs. So many of them are taken over by the people that seem to value criticism name-calling whatever over information. From what I see on this blog most of the people are sharing information and I loved seeing the moderator make an attempt to calm down one of the posters. Unfortunately the poster came back and doubled down on what I consider another abusive posting. Congratulations to Ed for trying to rein him in

  13. Good line… I taught myself to use RA for house appraisals in the mid-90’s and used it occasionally until about 2005. Since 2005, I have used and included statistical analysis and regression for every report – no matter who the client is. Can’t say it always makes a lot of sense, but with excel macros, it is easy to use and provides a little extra bang for the buck. It is also good for recognizing issues/trends that might not be readily apparent from a review of the raw data. One of these days I may take a class in RA, but after 40 years in the hot seat, I am more interested in travelogues and how to get out of this business with some skin.

  14. I am all for regression analysis this is commonly used throughout many other professions which try to provide an estimate of value. I am referring to the stock market, real estate investors, and many others.
    My Regression Analysis Tool/program allows the appraiser to calculate the lot size, GLA square footage, and
    basement square footage adjustments with full compliance of USPAP, which requires
    that the appraiser show evidence in his/her work file supporting these adjustments.
    Today this is a problem because appraisers don’t have any supporting evidence for these
    major adjustments which is well known throughout the industry.
    This happened because the forms have dissected the value into several different areas which must be value separately
    and can lead to overlapping of adjustments.
    My program shows how to prevent this overlapping from happening and will help the public and user of appraisals to have a better understanding of the market approved.

    Respectfully,
    Paul J. Smith, SRA

  15. I am all for regression analysis this is commonly used throughout many other professions which try to provide an estimate of value. I am referring to the stock market, real estate investors, and many others.
    My Regression Analysis Tool/program allows the appraiser to calculate the lot size, GLA square footage, and
    basement square footage adjustments with full compliance of USPAP, which requires
    that the appraiser show evidence in his/her work file supporting these adjustments. Please see for yourself at Appraisltool.net.
    Sincerely
    Paul J. Smith, SRA

  16. I appreciate the comments sent in. They all are worth reading considreing they have been sent by appriasers who care about our profession and the challenges we are given an opportunity to respond to or close shop.

    I have tried a variety of analytic approaches with mixed results. I did find one software analytical tool that is different from all the rest and use it. This is very much worth looking into by all residential appraisers who are trying to migrate to a report with stronger, defensible, printed support for market adjustments. This system still requires the experience and skills of proven appriasers who know their local markets to select the best available qualifying comparables. Then the appriaser starts entering the comp data into the software and watch the imbedded multiple regression calculations go to work for you. This system does not lead to our extinction by relying heavily on mass valuation techinque developers, many who are scrambling to elbow us aside to get to the fees and deliver higher risk to lenders in a nice little package! I suggest you all look into this system because it applies to all markets with or without significant transaction data base resources. http://appraisalanalyticaltool.net We have nothing to loose and much to gain by looking into all our options.

    Some time we should be talking about the elevated risks taken by the investors in the mortgage backed securities by using AVMs in exchange of on-the-street trained, ETHICAL appraisers. Why would they choose the hype about – quick values for sale!! Hurry Hurry just a click away …? The skilled and experienced appraiser’s real market fee is mony well spent ( actually a hell of bargain) for the hands on accountablity compared to demanding and actually placing getting a quick value result over trustworthiness. How many loans are actually delyed by slow appraisal work by the way?!

    Would they choose a dentist to speed up for lower fees?
    Would the Board of Directors or the CFO of companies selling mortgage backed security market products tell their investors their lossses were well worth the higher risks attached to cheaper appraisal fees and quicker turn around on getting a value. Speed over accuracy is always risky when the results are to be trusted and relied upon to make important descisions.

  17. I appraise in an urban environment and cannot speak expertly of rural areas however, it is within my understanding that this is the purpose on the MC Addendum. It is my understanding that if you are forced to utilize “General” V/s “Comparable” trends then all you have to do is disclose. “I did what I did because I had NO Choice”. I agree with some of the posts that indicate that the market is EXTREMELY volatile however, disagree with those who suggest that the lender does not need to be reminded of that fact. If the market falls apart tomorrow and I have indicated that market trends are stable with NO statements of volatility, then it could possibly be misconstrued as misleading. Tell the lender.. “Market conditions are volatile”… “Future trends are unknown”. Write every file under the assumption that ALL governing bodies (DBPR, FREAB, Fannie, ECT…) will at some point get a hold of and challenge your report. It’s all sunshine and rainbows until you get a file subpoena from an attorney or a letter from the state. Do you really want anyone asking you “Where did you get that number”? and your response be “I don’t know”? Use regression and build a Bullet Prof Work File. This is NOT for the Lenders benefit rather yours in protection of your license and livelihood. Once complete, the benefits are HUGE. You can make BIG adjustments with no concerns….. “It is what it is because that’s what is has to be”!!! Never truly care if you get a “Nasty Gram” from the state. You now have a solid file! In my opinion, appraising today is less of an opinion of value and more of an exercise in analytics. I could be wrong but I tell you this, I never lose sleep on the quality of my files nor statements therein. The biggest issue with regression is TIME. Yes, market abstraction and regression analysis is time consuming and I am not sure ‘how” to do this at the absurd fees offered by most AMC’s however this I can tell you, NO AMC will stand beside you in court while you are trying to defend your file. No AMC will care if lose your license or even get a “Ding”, and now have astronomical E&O fees.

  18. Interesting commentary. Ran across this link while researching yet another RA tool solicitation from email. We don’t need automated analysis to do a good job as appraisal valuation professionals though. Perhaps some people find them very helpful, but appraisers who know how to appraise intricately and understand the details of the market don’t have to use these tools. The additional tools may be helpful for some purposes, but macro analysis is commonly the lenders job. Micro analysis is the appraisers job. We most commonly appraise the specific deal, and the specific home. As of today, where did that home fit into the sliding scale and common comparison spectrum? I don’t use analysis tools, but I do post my complete 1 yr area unfiltered, and then various filtered and 3 year data sets within addendas. If reviewers seek to challenge my conclusions they can waste their time on regression analysis if they want to. That sort of analysis works better for condos and massive uniform housing complex like rises and major projects. Trending analysis often falls flat within proper and narrow comparability range, because there is often not enough data to populate those pretty little charts and scale up any data properly. I’ve never found much help with automated analytical tools for your typical detached single family home appraisal. The gut feeling matters and you’re better off maintaining a stringent critical mindset about the market, rather than relying on any automated tools. Review the whole market and review the narrow matching portion against your subject. Don’t waste your time looking at charts and avm spit outs. Instead spend your time reviewing data on an individual sale by sale basis, and go the extra mile, like reviewing pics and making notes for all potential comps, pre-inspection. Trust your gut feeling and stand in the shoes of a buyer. If you’re honestly being objective and impartial, you’ll relate to both the buyer and seller position and you’ll value impartially, highest and best, within established ranges, without exceeding them. Regression analysis is a favorite in distressed and heating markets because it makes valuation out of range an easy task. But where does it end? Every market has a ceiling and a floor, and these analysis tools usually fail to identify that, which is why I absolutely never use them. If they ever become required tools, the clients can order automated appraisals instead of my appraisals, because that’s all regression analysis is, is another form of automated valuation unchecked by personal analysis. You’d spend as much time backtracking the RA and figuring out if it’s credible or not, as you would taking the time to provide thoughtful verbatim comments and manual analysis of the market picture anyways. I don’t see the point in promoting avm’s or ra tools. They’re take it or leave it, and neither is an actual personal appraisal, from a thoughtful qualified licensed appraiser. I personally don’t appreciate an avm tool that is free to Realtors but appraisers have to pay to use. Talk about a shot in the foot and unfair playing field. Researching that specific point is what brought me to this thread. I’ll be performing fully manual appraisals from now to infinity, and I don’t care what dazzling new tool the other guys are using, I’ll still use my brain, which has superior calculations per second to any existing computer program, and a pen and paper. If you can’t personally recreate your methods via pen and paper, you should not use those methods. Your pal – Jeremy Hall Appraisals – Colorado.

  19. Oh dang, that post was longer than expected. HA! my bad. But just to say, be cautious when promoting these automated tools. It’s like promoting your lower cost replacement that will one day put you out of a job.

  20. What exactly have the appraisers been doing to justify a time adjustment in the sales comparison grid up to now? Justifying statements that the subject’s market neighborhood is declining, balanced or increasing can not be new to most of the appraisers out here. After all we have had to show reasons for the declining market since the bubble popped. Most of us have used formulas for decades. I live near the Washington D.C. Markets and any one neighborhood could be in a decline, increasing or balanced. The formula can be explained and utilize simpler in my opinion using these tools. Instead of showing your work the tools offer a summary. I don’t see what the problem is.

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  22. I would like to see something. Some training that is on the East coast would be nice and something that does not occur a year from now and is not to the tune of 1,000 for the training on predetermined numbers. But the unusual fact is that appraising in most of upstate NY is also suburban/rural where data is sporadic as well but not few and far between as The Appraiser Coach covers. That being said I have used a company that charges a recurring fee and found that on a $45,000 house there was a 17,000 for a .5 Garage yes thats right 17,000 for a one half car garage. By the time was all said and done the comparables where adjusted 77% of their sales price. Not something I can turn in to the company I work for or the lender either. I read your recent posting on $25 a square foot and find it interesting that you use your own. I took a webinar and that one also had the number work out perfectly to get a 90% accuracy rate. I have used that method and the best I saw was about 57%. Numbers all over the place and again not something you can hang your hat on. Can you teach a webinar on what you use? Coach.

    Scott

  23. In many cases, incompetence does not leave people disoriented, perplexed, or cautious. Instead, the incompetent are often blessed with an inappropriate confidence, buoyed by something that feels to them like knowledge.

    Dunning-Kruger Effect

    I’m an appraiser with graduate level statistics background. I have been using regression and other techniques for over 20 years. I found this site looking for Roy Wright because I had just read his description of his seven hour regression class. The description is wrong and shows a lack of real understanding of regression.

    A consider it a real problem that a lot of people are going around the country teaching regression analysis without really knowing what they are teaching.

    Finally, most of the arguments above (just skimmed) attacking the use of regression appear to be based upon a lack of understanding of what regression can be used for. Regression is a tool, a very good tool if used correctly, to aid the appraiser in forming her or his opinion.

    In a couple of weeks I will be making a presentation to attorneys and appraisers in Wisconsin concerning uses and misuses of regression in eminent domain cases.

    1. Jim,

      Any accurate information on employing the RA would be greatly appreciated. Just like many posters I feel every site I go to talks about promoting some tools or software.
      One of the biggest concerns I have with RA is how does a software determine what condition all of the sales are in. Recently in a a report I was working on a home that was a C4 sold and then 4 months later was renovated and flipped for $168,000 more. This is a perfect paired sales analysis, but using a 168,000 adjustment just on condition would be abusurd. Sale price was 660,000 I do not dis agree that more support is better. Still, how does the regression software determine what is a C2, C3, C4 when the local MLS do not have condition ratings that reflect the same kinda of labeling that appraiser use. Also if all the data is based on the MLS outputs then we are relying on agents to make accurate listings, which i can tell you in almost every report I fill out, I have to reach out to agents to confirm difference in Sq Ft postings as compared to tax living areas, or seller concessions were an extra zero was added to make a $100,000 concession instead of $10,000. These are major things we can easily identify on a case by case basis, but in a larger scale does this not impact the data? I would imagine this bogus information would have some kind of misleading outputs after a certain point. In an nut shell it take 60 hours and a test to become an agent, there are over 50,000 agents in Virginia. I know many agents that barely speak English well at least in my area.. After a certain point the data has to start stepping on itself. All the tools for RA i have used just want massive inputs. Some offer ways to make changes and filters, but how effective is RA if the data being input can not be relied on. I get there are deviations and the market is not perfect, so paired sales analysis also has its slew of issues, but i just want to learn more about RA from some one who understands it on a fundamental level and whats its uses are. I know it was a long post, but i just feel like as i read these threads I don’t see anyone commenting on the quality of the data being used, and I think as an appraiser choosing the right comparables is the most essential part of report writing, but if we are just using some mass data to make adjustments to what we thought are the best comparables, but they turn out having excessive adjustments, then where does that leave us. One RA tool i used suggested a 15,000 adjustments for a garage in suburbs in VA which i know is not accurate, nor would any market participant pay some one an extra 15,000 for a one car garage when they can purchase the same exact house for 15,000 in a cookie cutter neighborhood. I get that we can not rely on RA 100%, but i mean when i see outputs like that it almost makes question does it really have any relevance in my area, esp knowing some where down the line some agents listed the homes incorrectly. Just yesterday i did an appraisal and the agent was telling me the home was a split level and listed as that with no pictures and when i show up to the property it was a split foyer. I know my spelling is all over the place, but I am just trying to get my words out as fast as possible. Any advice, ideas or methods would be greatly appreciated.

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  25. Wow… Reading through these posts I shake my head. Some of you are serious A-holes. Keep it up Justin love your work my friend.

  26. Does anyone have a good regression analysis site to use, that has a legitimate fee basis? I was using statwing and they are now shutdown.
    Any help would be appreciated!

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