Students Of Value ScoreCard

This tool is developed for the reviewer, the signing field appraisers, and even our intended users. USPAP and Fannie Mae actually empower us to create such commentary to better communicate assignment results, I’ve just taken it to the next step. Through no fault of the appraiser, some appraisals provide intended users more risk, and some appraisals are less reliable due to the data sets that are available, an imperfect marketplace, and subject property characteristics and influences. When the intended user uses the appraisal with these inherent weaknesses, they assume the responsibility (or should) of knowing these weaknesses and acting with them in mind and inherently assume that corresponding responsibility.

That’s the goal, for intended users to be aware, and conduct their business with less liability to the appraisers, homeowners, and their stakeholders.

The Students of Value (SOV) scorecard  has been developed with the intention of increasing the reporting standard of USPAP, by elevating the discussion and analysis in the appraisal report. The appraisal results are graded on 4 different factors:

Validity of the Data – This is obviously an important subject.  This section considers the different approaches to value and the accuracy of the data for each approach to value which is commonly not discussed in traditional appraisals. 

Reliability of the Data and Analyses– The market trends and fluctuations, highest and best use considerations, the number of data points available especially related to the sales comparison approach, the opinion of value relative to values among the comparables. and more.

Subject Property Risk – This section discusses the location and condition of the property, and uses a weighted analysis to determine the risk score associated with the subject property. If the home is located adjacent to a major highway, this is where you will find the market reactions discussion as well as rating.  In addition, the scope of the assignment has an influence on the score for this factor. For example, if an appraiser was able to review a home inspection in the appraisal process, this produces a higher score. However The if this is a desktop appraisal assignment, the score would then be lower. a 

The credibility of the Appraiser –  This section discusses the competency of the appraiser at engagement, discusses license level, and produces a score for the results.,

Students of Value Intro Video —– CLICK HERE

I believe that this tool can really help to make some change in our industry.

In the Facebook Group for Students Of Value you can find free versions of the Students of Value tool and access to upcoming valuation and modeling classes.

You can also reach out to me to get access to the Students Of Value web app by emailing info@therealestateexaminer.com

Students of Value

As a fellow Student of Value, you believe and know that you are not the cause of value in real property. You confirm that you are the reporter of value in the market place. You confirm that you are a practitioner of developing credible opinions of value using standards that exceed the industry minimum even in a changing industry. You confirm that your study of the real estate market is paramount to your success in determining where value comes from. You confirm that by implementing the Student of Value Scorecard in your appraisal assignments you will uphold the ongoing study of your field, you will uphold public trust for the industry by working with homeowners in addition to stakeholders, and you will report assignment results as more important or at least equally as important than the developed opinion of value because you hold this to be true.

Appraisal Risk and Reliability Score Card Tier 1
Version 0.14

Below are the corresponding ratings that have been developed with a large nationwide group of users considered. These have been developed based on research and reporting standards in scientific studies including social and hard sciences. This is the first iteration of many regarding this scoring. The scores themselves only alert the reader to weaknesses in the appraisal results by exceeding the minimum standard provided to appraisers by our clients. These ratings are not set in stone, the signing appraiser can alter the ratings and the weights of the scores as needed. However, it is recommended, by altering the ratings, that you only improve the standard, not lessen it. It is a requirement of the signing appraiser to accurately display the weights of the scores and reasons for alteration from the Students of Value scorecard.

It is recommended that the scorecard is not performed till the completion of the appraisal assignment. Each section of this document has a corresponding section of the excel calculator with ratings to be selected by the signing appraiser. For readability, it is required that the signing appraiser only highlight the selected rating while keeping the non-selected ratings in the scorecard. Removal of the non-selected rating removes the relative value of the selected rating from its population (choices). The scores are an indicator of weaknesses, but your reader needs to read about the weaknesses. Provide additional commentary as required.

William Trombly and The Real Estate Examiner are the Students of Value Score Card and spreadsheet owners. No sale of this service and or product is permitted by anyone other than the explicitly stated owners in this document.

(“Copyright © The Real Estate Examiner 2023”)

Written by William J Trombly – Certified Residential Appraiser

LIMITATIONS ON USE

The Materials on this Web Site and or document are only for your personal use or, as applicable, for the internal use of your employer, and they are not for commercial exploitation (for example, by resale to others or by republication to the public). Further, you may not decompile, reverse engineer, disassemble, rent, lease, loan, sell, sublicense, or create derivative works from this Web Site or document or from the Materials referenced.  You may not use the Materials in any way that harms the author, our employees, directors or other representatives, our participating rightsholders or users, or any other third party.

Students of Value Certification:

The signing appraiser using this scorecard has exceeded the minimum standard of Fannie Mae and USPAP limited to the scores presented. The minimum standard is considered low and not the best available product for intended users. The appraiser has performed additional analysis and reporting of appraisal results to uphold the public trust of the profession, ensure compliance with higher standards of valuation, and does consider appraisal modernization as an ongoing concern needing continued refinement and development. The minimum standard presented to appraisers has fundamental flaws that are not readily considered in traditional appraisal assignments, and therefore this certifies the signing appraiser has discussed the shortcomings and risks involved in the appraisal results based on the factors presented. When the intended user uses the appraisal with these inherent weaknesses, they assume the responsibility of knowing these weaknesses and acting with them in mind and inherently assume that corresponding responsibility.

Reliability Section

Reliability 1.

Develop histogram comparable sales

Is this a normal distribution? (A normal distribution or close to is needed for this rating) Expand the data set to allow for comparable sales normal distributed data set if available. If this is not available the rating defaults to a 1.

Identify the mean of the comparable sales data set

Identify the standard deviation of the comparable sales data set

Does the developed opinion of value fall within 1 standard deviation of the comparable sales data set?
NOTE: If you don’t have your own Histogram and Standard Deviation Tool
https://statscalculator.com/

Rating 1: The developed opinion of value falls outside of 3 standard deviations of the comparable sales data set

Rating 2: The developed opinion of value falls within 3 standard deviations of the comparable sales data set.

Rating 3: The developed opinion of value falls within 2 standard deviations of the comparable sales data set.

Rating 4. The developed opinion of value falls within 1 standard deviation of the comparable sales data set.

Rating 5. The developed opinion of value falls within a 1/2 standard deviation of the comparable sales data set.

NOTE: Due to the generally heavy weighting of the sales comparison approach, the reliability section takes the number of comparable sales into consideration twice. The first time in the Reliability 1 section and again in the Reliability 2 section.

Reliability 2.

Were there sufficient comparable sales supporting the developed opinion of value or is this an extraction of the data set?

Rating 1: There were 1 or fewer comparable sales available.

Rating 2: There were at least 3 comparable sales available

Rating 3: There were at least 5 comparable sales available with the option to use the best available requiring the least adjustments and or the most recent.

Rating 4: There were numerous comparable sales available with the ability to minimize the need for adjustments

Rating 5: The best available comparable sales were available with the ability to minimize the need for adjustments.

Reliability 3.

Did the use of extraordinary assumptions and or hypothetical conditions affect assignment results?

NOTE: The use of an extraordinary assumption (EA) is commonplace for new construction homes. This use of an EA for new construction is an exception to this reliability rating and should not be considered in the analysis.

Rating 1: The use of the extraordinary assumption/s was used in the analysis and if were to be found false would alter the opinion of value by more than 5% of the opinion of value.

Rating 2: The use of the extraordinary assumption/s was used in the analysis and if were to be found false would alter the opinion of value by more than 2% of the opinion of value but less than 5% of the opinion of value.

Rating 3: The use of the extraordinary assumption/s was used in the analysis and if were to be found false would alter the opinion of value by less than 2% of the opinion of value.

Rating 4: The use of the extraordinary assumption/s was used in the analysis and if were to be found false would alter the opinion of value by less than 1% of the opinion of value.

Rating 5: No extraordinary assumptions were used in the analysis and development of the appraisal assignment.

Reliability 4.

Trend consistency and or fluctuations:

Are the current trends consistent with long-term 5–10-year trends?

Has the developed opinion of value been heavily influenced by the current sales trends?

Rating 1:  Current market trends indicate a strong decline.

Rating 2: Current market trends indicate a decline in contrast to 5–10-year trends.

Rating 3: Current trends are increasing or decreasing at a strong rate.

Rating 4: Current trends are steadily increasing or similar to that of 5–10-year trends.

Rating 5: Current trends are stable with little to no fluctuations as compared to 5–10-year trends.

Reliability 5.

Highest and Best Use considerations can have strong influences on the use and opinion of value for a property.

Rating 1: The subject property in its current state does is not the highest and best use.

Rating 2: The subject property is grandfathered in its current state and is subject to change in the near future.

Rating 3: The subject property is in a transitional period and possibly grandfathered in and not expected to change within the next economic cycle.

Rating 4: The subject property in its current state is the highest and best use categorically, however, improvements could be made.

Rating 5: The subject property in its current state is the highest and best use with little to no indication of change.

Validity Scoring

Sales Comparison Approach

NOTE: In the event that the cost approach was not used, all ratings will be a Rating 1 for the sales approach section.

Completeness

Rating 1: We had barely enough to develop a credible opinion with each observation point or the approach was not utilized at all.

Rating 2: Some of the data with each observation point were available but not all data could be verified with a second source.

Rating 3: Most data was available with each observation point and almost all could be verified with a second source

Rating 4: Almost all data was available with each observation point and all data could be verified with a second source.

Rating 5: We had everything we typically would need for such an assignment with each observation point.

Similarity

Rating 1. There are no comparable sales like the subject property

Rating 2. Some data points used are comparable to the subject.

Rating 3. Most data observations used are similar to the subject property with the need for less than 10% net adjustments for physical factors of value for significantly weighted comparables.

Rating 4. Data observations are very similar to the subject property with the need for less than 5% net adjustments for physical factors of value of significantly weighted comparables.

Rating 5. Comparable sales are VERY similar to the subject property with the need for less than 2% net adjustments for physical factors of value.

Adequacy in the number of comparable sales:

Rating 1. 3 to make a market, the bare minimum.

Rating 2. 4-5 comparable sales were able to be considered using at least 1 sale within the neighborhood.

Rating 3. 6-7 comparable sales were able to be considered using at least 2 sales within the neighborhood.

Rating 4. At least 3 – 5 comparable sales are available within the neighborhood.

Rating 5. At least 3 – 5 comparable sales are available within the neighborhood and all significant factors of value are bracketed using these sales.

Rational:

1. The best available sales were used in the analysis. Although these sales are logical due to the lack of available data, these are the best available and would be considered by market participants. There are numerous differences between the subject and sales.
2. The best available comparable sales were used in the analysis. Although these sales are logical due to the lack of available data, these are the best available and would be considered by market participants. There are some differences between the subject and comparable sales.
3. Comparable sales have been used with some differences from the subject property.
4. Evidence-based valuation methods have been well implemented and sales have limited differences from the subject property.
5. Evidence-based valuation methods were used for selecting comparables and were easily applicable to the data.

Physical Adjustments
NOTE: These do NOT include view, location, and neighborhood adjustments.

Rating 1: There is a lack of measurable evidence to support adjustments concerning most factors of value.

Rating 2: There is adequate evidence to support adjustments concerning significant factors of value.

Rating 3: Paired sales analysis and aggregate market analyses were used to develop adjustments with credible results.

Rating 4: Multiple linear regression models were developed with adequate indications of adjustments.

Rating 5: Multiple linear regression models were developed with strong indications of adjustments and or no adjustments were required.

Market Conditions and Seller Concessions adjustments

Rating 1: There is a lack of comparable and market area data to support a credible market condition adjustment.

Rating 2: There is some data available to support a market condition adjustment.

Rating 3: There is a good amount of data available to support a market condition adjustment.

Rating 4: There is a good amount of quality data available to support market condition adjustments with multiple models available for analysis and consideration.

Rating 5: There is a good amount of quality data available to support market condition adjustments with multiple models available for analysis and consideration that adhere to higher quality standards. NOTE: Higher quality models include linear regression models that have moderate to good homoscedasticity along the linear regression line for both the comparable sales data set and the whole hood data set. In addition, there are true pairs supporting market condition adjustments within a 2-year time span.

Other adjustments

NOTE: These adjustments include but are not limited to financing adjustments within the sales grid as well as the neighborhood, location, and view adjustments.

Rating 1: Adjustments appear to be needed based on historical data and are derived based on sensitivity analysis within the sales grid.

Rating 2: These adjustments are derived based on simple summary statistics differences with a below-average quality data set.

Rating 3: These adjustments are derived based on simple summary statistics differences with an average to good quality data set.

Rating 4: These adjustments are derived based on simple summary statistics differences with an average to good quality data set with additional consideration to pairs data.

Rating 5: Multiple observations of true pairs were available and resulted in a credible adjustment or no additional adjustments are needed.

Active Listings

NOTE:  This section has been considered and given weight due to its importance in the marketplace. As we all know as appraisers the active listings in a market are the future sales and provide the reader and appraiser important information regarding the results of their analysis as well as the market in general.

Rating 1: No comparable listings are available.

Rating 2: Few comparable listings are available requiring less than 10% physical adjustments that do not allow clear application of the principle of substitution.

Rating 3: Multiple comparable listings are available requiring less than 10% physical adjustments that allow for easy application of the principle of substitution from within the market area.

Rating 4: Multiple comparable listings are available requiring less than 5% physical adjustments that allow for easy application of the principle of substitution.

Rating 5: Multiple immediate area (subdivision or neighborhood) comparable & very similar listings are available requiring less than 5% physical adjustments that clearly define the supply side pricing and allow for easy application of the principle of substitution.

Principal of Substitution Defined – The Appraisal of Real Estate 14th Ed.

The principle of substitution states that when several similar or commensurate commodities, goods, or services are available, the one with the lowest price attracts the greatest demand and widest distribution. This principle assumes rational, prudent market behavior with no undie cost due to delay. According to the principle of substitution, a buyer will not pay more for one property than another that is equally desirable. Property values tend to be set by the price of acquiring an equally desirable substitute property.

Cost Approach

NOTE: In the event that the cost approach was not used, all ratings will be a Rating 1 for the cost approach section.

Completeness

Rating 1:  There is little to no evidence of cost data available for this style or structure of real estate or the cost approach was not performed.

Rating 2: Some evidence of cost data is available using industry-accepted sources.

Rating 3: There is strong evidence of cost data available using industry-accepted sources with some new construction data points available.

Rating 4: Moderate evidence of land value is available with evidence of cost data and new construction data being similar and or superior to Rating 3.

Rating 5: Very strong evidence of land value is available with multiple new construction data cost models used considering industry-accepted data sources and similar new construction occurring within 6 months.

Adequacy

Rating 1: Only 1 available industry-accepted source was used in the analysis or the cost approach was not performed.

Rating 2: At least 2 cost estimates were able to be developed using industry accepted data sources (not new construction).

Rating 3: At least 2 cost estimates were able to be developed using industry accepted data sources and one of these estimates uses new construction data costs.

Rating 4: At least 2 cost estimates were able to be developed using industry accepted data sources and one of these estimates uses new construction data costs with adequate indications of new construction lot values.

Rating 5: At least 2 cost estimates were able to be developed using industry accepted data sources and one of these estimates uses new construction data costs with STRONG indications of new construction lot values.

Accuracy

Rating 1: Cost estimates appear to be reasonable in analysis or the cost approach was not performed.

Rating 2: Cost estimates are reasonable in analysis and are supported with new construction.

Rating 3: Lot value is adequately developed and cost estimates are supported with new construction.

Rating 4: Lot value is clearly developed and cost estimates are supported with new construction.

Rating 5: Lot value is very clearly developed and cost estimates are nearly identical with new construction.

Reconciliation

Rating 1: The developed cost approach was used at the request of the client and provides little to no validity to the appraisal assignment due to a lack of data sources and or costs are considered a moving target with strong continuous fluctuations both up and down given market trends or a large margin of supplier pricing making the approach less valid, or the cost approach was not performed.

Rating 5: The developed cost approach was adequately developed and considered logical analysis and application.

Income

NOTE: In the event that the income approach was not used, all ratings will be a Rating 1 for the income section.

Completeness

Rating 1:  There is little to no evidence of income GRM data available for the subject property and comparable sales or the income approach was not performed.

Rating 2: Some evidence of income data is available and some extrapolation of the data or development of additional data points has occurred to derive a credible result.

Rating 3: There is moderate evidence of income data available using similar comparable sales data with no need for extrapolation or development of data points.

Rating 4: There is strong evidence of income data due to many available using similar comparable sales data with no need for extrapolation or development of data points.

Rating 5: There is strong evidence of income data due to many available using similar comparable sales data with no need for extrapolation or development of data points with a majority of the considered data points occurring within the last 6 months.

Adequacy

Rating 1:  3 or less data points were available to develop GRM data points or the income approach was not performed.

Rating 2: 4-5 comparable data points were able to be considered using at least 1 sale within the neighborhood.

Rating 3: 6-7 comparable GRM data points were able to be considered using at least 2 sales within the neighborhood.

Rating 4: At least 3 – 5 comparable GRM data points are available within the neighborhood.

Rating 5: At least 5 comparable GRM data points are available within the neighborhood and all significant factors of value are bracketed using these comparable data points.

Similarity

Rating 1. There are no comparable GRM data points available for analysis and or the income approach was not performed.

Rating 2. Some data points used are comparable to the subject.

Rating 3. Most data observations used are similar to the subject property with the need for less than 10% net adjustments for physical factors of value for significantly weighted comparables.

Rating 4. Data observations are very similar to the subject property with the need for less than 5% net adjustments for physical factors of value of significantly weighted comparables.

Rating 5. Comparable sales are VERY similar to the subject property with the need for less than 2% net adjustments for physical factors of value.

Reconciliation

Rating 1: The developed income approach was used at the request of the client and provides little to no validity to the appraisal assignment due to a lack of data or the need for extrapolation of a limited data set.

Rating 5: The developed income approach was adequately developed and considered logical analysis and application.

Subject Property Risk

Structure Condition

NOTE: If the interior of the home is not viewable and or not inspected, this rating becomes a 2 at the highest. This is to remain true unless there is evidence to the contrary (Estimated effective age of the home can be evidence to the contrary, especially true for newer homes).

If additional information is available providing evidence of worse condition than a rating of 2 this rating defaults to a 1 rating.

Rating 1: The subject property is in a poor and unlivable condition that provides numerous health and safety risks.

Rating 2: The subject property is in poor to fair condition that may have safety risks.

Rating 3: The subject property is in average condition with no apparent safety or health risks.

Rating 4: The subject property is in good condition with no apparent safety or health risks.

Rating 5: The subject property is in very good to excellent condition with no apparent safety or health risks.

Structure Location and External Influences

Rating 1: The subject property is in close proximity to external influences with current negative influences on marketability

Rating 2: The subject property is in close proximity to external influences having a negative influence with negative influence on marketability within the last year.

Rating 3: The subject property is moderately close to external influences and has not had a recent negative influence on marketability or no evidence to support a negative influence.

Rating 4: The subject property location appears to be neutral with no negative influences on marketability.

Rating 5: The subject property location is considered beneficial as compared to proximate locations and neighborhoods.

Scope of Inspection

Rating 1: Not inspected

Rating 2: Inspected by 3rd party not obligated to the appraiser by contract and or responsibility or accountability

Rating 3: Inspected by a trained trainee or trained assistant

Rating 4: Personally inspected by signing appraiser only

Rating 5: Personally inspected by signing appraiser and viewed licensed inspection report in addition to the scope of work.

Credibility Scoring

License Level

NOTE: Experience is not considered in this analysis. This is due to the subjective nature of this quality. This is better considered in the competency ratings below. This is meant to be binary. The SOV grading system is not a proponent of the idea that if you have been performing appraisals for a long time that gives you more credibility. The credibility section is given only a 10% value for this important distinction as opposed to the other ratings which significantly provide more contribution to the grading system.

Rating 1: License level and/or professional experience is not adequate for assignment and additional consultation was required to develop assignment results

Rating 5: License level and professional experience is adequate for the assignment

Competency of the subject type

Rating 1: The appraiser has developed credible opinions and analysis regarding real property similar in style and design.

Rating 2: The appraiser has developed some credible opinions and analyses regarding real property similar in style and design.

Rating 3: The appraiser has developed many credible opinions and analyses regarding real property similar in style and design.

Rating 4: The appraiser has developed many credible opinions and analyses regarding real property similar in style and design and maintains some market knowledge regarding similar real property.

Rating 5:  The appraiser has developed many credible opinions and analyses regarding real property similar in style and design and maintains a wealth of market knowledge regarding similar or near-identical real property.

Competency of the subject neighborhood/market area

Rating 1: The appraiser has developed adequate credible opinions and analysis regarding real property similar in the market area.

Rating 2: The appraiser has developed some credible opinions and analysis regarding real property similar in the market area.

Rating 3: The appraiser has developed many credible opinions and analyses regarding real property similar in style and design in the market area.

Rating 4: The appraiser has developed many credible opinions and analyses regarding real property similar in style and design and maintains some market knowledge regarding similar real property in the neighborhood.

Rating 5:  The appraiser has developed many credible opinions and analyses regarding real property similar in style and design and maintains a wealth of market knowledge regarding similar or near-identical real property in the neighborhood.

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