A Positive Comment

Fellow ISA Board member and appraiser Judith Martin, ISA CAPP left a comment last evening on a previous post about current market trends and only using the "freshest" of comps in appraisal assignments.

As you know, when there is a good comment, I like to move it from the comment section of the individual post where it is not always seen to a new and full post where all readers may see it. Judith makes several excellent points in her comments about how the existing economic issues have impacted value conclusions and appraising.

Judith states:

Todd, excellent blog. My fellow local appraisers have been discussing this very subject. It is a sticky situation especially when dealing with FMV or MV for the client. The market is moving so quickly now that it makes one very nervous at times to put a number down. I wrote a market value appraisal last March for a client who wanted to sell a large quantity of Williamsburg furnishings. The items were to be sold within a month of the appraisal. However, the sale was postponed and has not happened as of yet. In my estimate my client has lost at least 50% of the market value from last March due to the financial markets today. This is just one reason it is so very important that the reader of the appraisal understand the meaning of Effective Date.

Judith, before joining the ISA Board was the lead instructor for the ISA Core Courses so her comments carry much validity. She taught appraisal theory and methodology for many years and is familiar with the pitfalls of appraising in a declining market. Her comment on the appraiser understanding the effective date is so important in today's economic climate. I would even bring it a step further and ensure clients are aware of it as well. It is a concept that I failed to mention in my post on using fresh comps, yet the effective date of the value conclusion is just as important. In a declining market, and in Judith's scenario above, if the effective date in the report is not properly defined and noted (and perhaps it should be bolded due to the current economic atmosphere and value fluidity) the clients expectations from the appraisal report may be one thing and the market valuation only a short time later something completely different. This can cause serious client/appraiser problems and increase assignment risk and the potential for legal exposure.

It might be a good time for all appraisers to review their documentation and verbiage and make sure proper emphasis is given to comps, effective dates, and market trends.

To read the AW Blog original post on fresh comps click HERE.