appraisers, we are as good as our clients ask us to be. That is true of
any business people. For the heart surgeon, "good enough" needs to be
very good: one slip, and the client is dead. For the maker of peanut
butter, on the other hand, good enough may mean only that the
contaminants in the product are kept below some maximum tolerance
level. The requirements for an appraiser are somewhere in between.
Appraisers are judged not so much on the accuracy of their price
predictions but on form and credentials. The quality of a doctor's work
can be measured by the percent of patients that are cured. The quality
of a baseball player's play is measured in a ream of statistics:
batting average, on-base percentage, or earned run average. No one much
cares whether the pitcher throws the ball in an unorthodox way.
Results, not form or credentials, are all that counts.
Appraisers are judged on whether their product, the report, is
"credible." The Uniform Standards of Professional Appraisal Practice
make credibility the standard. And credibility is open to broad
interpretation. It is never as clear-cut as whether the ball got to
first base before the batter. Joe and Enid compete for appraisal
business. Joe does a great deal of business, in spite of the fact that
his value estimates are consistently well below what the properties he
appraises eventually sell for. Enid, conversely, is very accurate as a
price predictor. But she does far less business, because she is a
rookie, without credentials. No one knows how good Enid is because no
one is keeping score on what should be the primary task of an
appraiser: to be an accurate price predictor. Appraisers and their
clients are in serious need of a scorekeeper. We need umpires, and we
Second Street Industrial Appraisers is the new branch of Eric
Reenstierna Associates. Second Street Industrial Appraisers specializes
in the valuation of workplaces - offices and industrials. Rather than
generalize, like a doctor who may operate on a stomach one day and a
brain the next, we specialize. And by specializing, we bring a level of
knowledge to an assignment that is more likely to lead not only to
credibility but to higher accuracy in price prediction.
We use the tools of a statistician. We answer questions that our
clients may not be in the habit of asking:
- what will the value of this property be in ten years?
- what are the circumstances that would produce a high or a low price?
- how is this property likely to perform as an investment?
For investors, the answers to these questions are important. The data
are available to provide useful answers. Data services make projections
of vacancy, rent, and capitalization rates over five- and ten-year
horizons. Appraisers can use this kind of data to answer investment
questions and to forecast price.
Excellence sometimes comes not so much from what is asked of us but
from what we ask of ourselves. At Second Street, we operate on that
basis. We want to know how we are performing, in terms of answering a
broad range of our clients' important questions. We track the accuracy
of our answers. We want to compete not just on adequacy, or "good
enough." We want to compete on excellence.
Eric T. Reenstierna, MAI