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Book 1 - Appraisal Institute of Canada

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InvestigatingBy Mike Schulkowsky, AACI, P. App, Member, Investigating Committee<strong>Appraisal</strong> standards –The rules <strong>of</strong> art or science?The dramatic difference in appraised value <strong>of</strong> the same property certainly indicates that the art <strong>of</strong> appraisal is not an exact science. Over the years, I have dealtwith appraisals <strong>of</strong> properties in assessment appeal cases and have found that, in looking at the report <strong>of</strong> the appraisers, it was difficult to believe that it wasthe same property that was being appraised. The differential in price is so great and this price difference by credited appraisers certainly does not give anygreat confidence in the conclusions reached.– Honourable Justice N. Robert Anderson, Supreme Court <strong>of</strong> Nova ScotiaDecisions dealing with the standard <strong>of</strong> care applicable to valuators and appraisers acknowledge that these pr<strong>of</strong>essions deal with matters <strong>of</strong> art rather thanscience, and that variations in their conclusions are therefore common... – The Honourable Madam Justice Neilson, Supreme Court <strong>of</strong> British ColumbiaThese quotations are certainly notevidence <strong>of</strong> the first, nor will they bethe last time, that the essessence <strong>of</strong>the appraisal pr<strong>of</strong>ession has been debated.The appraiser who appreciates an element <strong>of</strong>subjectivity would wholeheartedly agree withthe court’s conclusion that our skill is more artthan science. Appraisers should be proud <strong>of</strong> theirsubjective skill set, yet must continually examinethemselves to ensure their data, assumptions andmethodologies are both consistent and accurate.We are accountable to not only our banks, mortgagors,home owners and investors, but also ourpr<strong>of</strong>essional Standards. On occasion, we hear thederisive comment that the acronym AACI standsfor “appraisal according to clients’ instructions.”This public cynicism stems from incidences <strong>of</strong>appraisers relying too heavily on their subjectiveskills or succumbing to client pressures.In contrast to the subjectivity <strong>of</strong> art, considerwhat appraisers are required to do:• Research the marketplace; observe marketphenomena and record market data.• Collect a knowledge base <strong>of</strong> sales and, withhighly skilled techniques, create systematicadjustments to reach conclusions.• Determine a predictable outcome through theprecise application <strong>of</strong> facts and principles andevaluate results through three methodologies.• Present facts, reasoning and beliefs about thesubject in an orderly manner.• Prepare appraisals to allow others to measure,review or rely on our conclusions.• Adhere to the Standards, a system <strong>of</strong> rules.Does this list <strong>of</strong> research, testing and hypothesissound more like art…or empirical science?Although the courts accept that appraisal isan impure science at best, we must treat ourpr<strong>of</strong>ession with the same respect as we would“A moreconscientiousapproach inestablishingaccurateadjustments andcautiously applyingour subjective skillswill build trust andfurther credibility <strong>of</strong>our pr<strong>of</strong>ession. ”give to genuinescience. In ourestimated values,appraisers makeassumptions aboutsales, rents oradjustments basedon known data.It is our responsibilityunderthe Standards toensure we havetaken great carethroughout theentire appraisalreport to vetthe known dataprior to applyingit to the unknown.With easy access to landtitle registries, MLS and other onlineresources, our toolbox for gatheringmarket information continuesto expand. Rather thanlimiting reports to onlythree sales, theappraisercan24Canadian Property Valuation Volume 54 | book 1 | 2010 Évaluation Immobilière au <strong>Canada</strong>

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