Low-Cost E&O Insurance from OREP     Working RE Home    Library/Previous Editions
 

During a routine practice, E. A. “Uncle Ed” Diddle, legendary basketball coach at Western Kentucky University, instructed his players to “pair off in threes and scatter out in little bunches.” 

If the preceding seems confusing, I suggest reading some of the recent comments, articles and editorials stressing the importance of the cost approach in developing opinions of market value. Arguably, this has been the most controversial of any single portion of the valuation process for the past 75 years. Recent policy changes by major users of appraisals have rekindled the debate as to the applicability and use of the cost approach.   

Formerly known as the summation approach, the Cost Approach is the most difficult to apply and arguably the approach most abused by practitioners.  There is more disagreement on this subject than any other portion of the appraisal process.  These differing opinions vary widely and are difficult to define with any degree of accuracy.  However; for discussion purposes I will attempt the impossible by categorizing the opinions into four groups.

Group 1:         This group consists of those who believe the cost approach should be used in all assignments if improvements are involved.  Arguments put forward to support their opinion are the simplicity involved in its application and easy for the reader to understand.  Neither of these assumptions is valid.

Group 2:         This group consists of those who believe the cost approach should be used most of the time if improvements are involved.  The primary reasons for use of the cost approach is similar to Group 1.

Group 3:         This group consists of those who believe the cost approach should be utilized in valuations involving only “special purpose” and/or “limited use” properties.  The primary reason put forth by this group is lack of market activity.  In other words there is insufficient market data available to develop a sales comparison or income analysis.    

Group 4:         Group 4 is made up of those few individuals that believe the cost approach should never be used as a stand-alone method in the development of market value. The primary reasons given are the methodology is flawed, cost is not equal to value, cost does not measure value, and estimates for depreciation must be based on the observed condition. 

The editorial in the fall 2006 issue of Rev Magazine, “Let’s Resuscitate the Cost Approach,” by nationally known author Henry H. Harrison, MAI, states “The Cost Approach is logical, easy-to-understand and often highly applicable, especially in situations where good market data may be sparse or even non-existent.“ 

The Appraisal Institute, from the Appraisal of Real Estate, Twelfth Edition, publishes the following definitions, and procedures.  

Cost approach: A set of procedures through which a value indication is derived for the fee simple interest in a property by estimating the current cost to construct a reproduction of, or replacement for the existing structure plus any profit or incentive, deducting depreciation from the total cost, and adding the estimated land value. Other adjustments may then be made to the indicated fee simple value of the subject property to reflect the property interest being appraised.  

In its classic form, the cost approach produces a value of the fee simple interest in the real estate at stabilized occupancy, so the total cost must include any costs needed to achieve stabilized occupancy. 

In the cost approach, value is estimated as the current cost of reproducing or replacing the improvements (including an appropriate entrepreneurial incentive or profit) minus the loss in value from depreciation plus land or site value. 

The cost approach is most applicable in valuing new or proposed construction when the improvements represent the highest and best use of the land.   

Depreciation: In appraising, a loss in property value from any cause; the difference between the reproduction or replacement cost of an improvement on the effective date of the appraisal and the market value of the improvement on the same date. 

Real estate is land and anything permanently affixed to it, including buildings. 

Real property is the interests, benefits and rights inherent in real estate ownership.  This is referred to as the “bundle of rights.” 

Price:  The amount a particular purchaser agrees to pay and a particular seller agrees to accept under the circumstances surrounding their transaction.   

Cost:  The total dollar expenditure for an improvement (structure), applies to production, not exchange (price).  Appraisers distinguish among direct (hard) costs, indirect (soft) costs, and the cost of entrepreneurial coordination. 

Value: 

1.      The monetary worth of a property, good, or service to buyer’s and sellers at a given time.

2.      The present worth of the future of the future benefits that accrue to the real property ownership. 

Limited market property:  A property that has relatively few potential buyers at a particular time. 

Special-purpose property:  A limited-market property with a unique physical design, special construction materials, or a layout that restricts its utility to the use for which it was built. 

Procedure for Estimating Value Via The Cost Approach

On Page 356 of the twelfth edition of The Appraisal of Real Estate, Appraisal Institute, outlines the steps involved in the use of the cost approach: 

1.                  Estimate the value of the land as though vacant and available to be developed to its highest and best use.

2.                  Determine which cost basis is most applicable to the assignment; reproduction or replacement cost.

3.                  Estimate the direct (hard) and indirect (soft) costs of the improvements as of the effective date of the appraisal.

4.                  Estimate an appropriate entrepreneurial profit or incentive from analysis of the market.

5.                  Add estimated direct costs, indirect costs, and entrepreneurial profit or incentive to arrive at the total cost new of the improvements.

6.                  Estimate the amount of depreciation in the structure and, if necessary, allocate it among the three major categories:

a.       Physical deterioration

b.      Functional obsolescence

c.       External obsolescence

7.                  Deduct estimated depreciation from the total cost of the improvements to derive an estimate of their depreciated cost.

8.                  Estimate the contributory value of any site improvements that have not already been considered.  (Site improvements are often appraised at their contributory value – i.e., directly on a depreciated-cost basis – but may be included in the overall cost calculated in Step 2).

9.                  Add land value to the total depreciated cost of all improvements to arrive at the indicated value of the property.

10.              Adjust the indicated value of the property for any personal property (e.g., furniture, fixtures, and equipment) or any intangible asset value that may be included in the cost estimate.  If necessary, this value, which reflects the value of the fee simple interest, may be adjusted for the property interests being appraised to arrive at the indicated value of the specified interest in the property.” 

In developing a value opinion by this method the appraiser has a variety of options from which to choose. 

§         One of six methods can be utilized to estimate the value of the site

§         An estimate of the sites highest and best use as vacant is required

§         An estimate of the highest and best use of the property if improved is required

§         One of at least four methods may be used to estimate cost new of the improvements – the most accurate being the “quantity survey method.”

§         One of at least three procedures may be used to estimate accrued depreciation.

§         Of the three categories of depreciation, physical and functional obsolescence is further subcategorized as curable and incurable.

§         Adjusting the so-called fee simple value in order to make it comparable to a partial interest such as a leasehold 

With the chance for error present in every step of this procedure, how could any reasonable person conclude that the cost approach is simple to use, easily understood, and produces a credible opinion of market value?  For those who believe this statement should take the time to interview some of the market participants whose actions the appraiser is supposedly analyzing and reporting.   

In order for one to believe that this accounting procedure represents the value of a fee simple, or lesser interest is to ignore several economic principles of valuation.  The first fact that must be recognized is that, when estimating reproduction or replacement cost new, the result of such an expense is nothing more than an accounting of all expenses necessary to create the physical structure.  This is why the cost approach was at one time called the summation approach.  This procedure also ignores the four factors of value that must be present in order for any object to have value: 

§         Utility – must create a need

§         Scarcity – supply must be less than relative demand

§         Desire  -- must create a desire

§         Purchasing power – utility and desire must be backed by effective purchasing power     

This accounting procedure should not be confused with value.  It also does not mean a knowledgeable buyer would pay the amount of the cost to assemble the finished product. 

In 1931, the appraisal arm of the National Association of Real Estate Boards (NAREB), in an official announcement, said “ . . . Such summation appraisals are condemned as unsound, inaccurate and misleading. [Richard U. Ratcliff, PhD, MAI, 1968 Issue of The Appraisal Journal] 

The Supreme Court of the United States has said: “Where the property taken, and that in its vicinity has not in fact been sold in recent times or in significant amounts, the application of this concept (market value) involves, at best, a guess by informed persons.” 

The Appraisal of Real Estate, twelfth edition, goes to great lengths in explaining the difference in real estate and real property, cost, price, and value.  The principle of contribution is also ignored in this summation method not to mention violation of the unit rule.   

In a typical appraisal assignment, the purpose is to develop a credible opinion of market value of a specified interest in a parcel of real estate, as of a specified date. In such an assignment the “thing” being valued is not the tangible real estate, but the intangible real property rights inherent in the particular parcel.  This is clearly pointed out in the following court decisions. 

In Kinter V. United States (156 F. 2d 5, 172 A.L.R. 232, 235 (3^rd Cir. 1946), the court said “...The government may neither confiscate his bargain nor be required to assume his loss.  But, it is the “value of the interest” that is guaranteed; not the investment . . . Cost is not synonymous with market value.  A fortiori, cost of land and cost of improvements taken separately and added are not to be equalized with fair market value.” 

“They relied largely upon reproduction costs.... The testimony of one appraiser, especially, would have led the jury to believe that this is a formula for arriving at the fair market value.  This is not so.... There is no necessary relationship between reproduction cost and market value.”  [Riley v. District of Columbia Redevelopment Agency] (Citation omitted) 

In another decision, the court said “ . . . A third method of appraisal is somewhat tentatively and timidly put forward by the claimant, namely; the reproduction method. Here an expert is called upon to give his version of the sound value of the building by estimating what it would cost to reproduce it, and then deducting a fair amount for depreciation. This “method” is perhaps the most excellent example conceivable to demonstrate that none of such abstractions ought to have a place in the search for market value, generally speaking.... Ignoring the fact that on the figures an absurd result reached, it is apparent that the reproduction is in itself absurd in the ordinary case, because even in ordinary times it is ridiculous to suppose that anyone would think of reproducing this or any like property, and that same thing would be true in the vast majority of cases, I should think. [United States v. 49,375 Square Feet of Land in Borough of Manhattan, 92. F. Supp. 387-388 (S.D. N.Y 1950, AFFIRMED PER CURIAM SUB. NOM. United States v. Tishman Realty & Constr. Co. 193 F.2d 180 (2d Cir. 1952, cert. Denied, 345 U.S. 918 (1952)](Footnote omitted).

The suggestion that the cost approach sets the upper limit of value is simply not true.  This implies that the cost new estimate is never understated.  More importantly, this procedure implies a preciseness that is not achievable in the art of real property appraisal.  In order for this statement to be true, the appraiser would have to develop a perfect land value opinion, a perfect estimate of highest and best use of the vacant site, as well as improved, a perfect cost new estimate, and all four agents of production must be perfectly balanced.  Common sense tells us that if two or more contractors were given identical specifications, even for the purpose of constructing a simple single-family dwelling, the results of the individual estimates would differ by varying amounts.   

Let me share the following “real world” example demonstrating the absurdity of such a concept.  The city of Owensboro, Kentucky, spent several weeks in preparing a cost estimate for construction of a proposed boat dock and ramp on the Ohio River.  Exact specifications were sent to several qualified contractors to bid on the construction of this project.  Three bid proposals were received.  These bids were at least one million dollars apart with the lowest bid exceeding the cost estimate by 1.4 million dollars.  To imply that an appraiser with no educational background or experience in construction can, within a matter of minutes, with nothing more than a calculator and cost manual at their disposal, produce an estimate of this or similar facility, then add the land and refer to the results as representing a credible opinion of market value makes about as much sense as installing a screen door on a submarine. To imply that the results of such a procedure represents a credible opinion of market value of a fee simple, or lesser interest, is not only absurd, it borders on insanity.   

Other Points of View
L. W. “Pete” Ellwood, MAI, CRE, made the following observations 

“The notion that summation is one independent approach to value, that comparison is another, and that capitalization is still another, seems so general that to question its validity may bring charges of heresy.  Nevertheless, common sense appears to favor the premise that these so-called approaches should be considered and employed as interwoven components of a single effort to reach a single estimate for a specific purpose. [The Appraisal Journal, October 1951, pp 518-525] 

Richard U. Ratcliff, PhD, MAI, makes the following observations: 

“A far to common philosophy was expressed to me recently by an appraiser in a conversation on the limitations of the cost-less-accrued-depreciation approach, when he said, “I know the cost approach is no good, but let’s not rock the boat.”  The pervasiveness of this attitude was suggested in a research study on income property appraisal on which much of the following commentary is based.  In a sample of reports by leading appraisers in the valuation of income properties, 95% included the cost approach in their analysis.  This is a noteworthy proportion in light of the fact that the cost or summation formula was totally discredited on logical grounds almost 40 years ago by Fred Babcock and others; that it is unsound economics; that the appraisal arm of NAREB in 1931 in an official pronouncement said “ . . . such summation appraisals are condemned as unsound, inaccurate and misleading;” that the logic of this position has never been refuted; that FHA has appraised millions of properties without benefit of the cost-less-accrued-depreciation; and that most appraisers know in their hearts and many appraisers will admit that cost depreciation estimates are typically fudged to arrive at conformity with an already determined value opinion.”  [Capitalized Income is not Market Value, The Appraisal Journal, and January 1968] 

Real Estate Appraisal, A Critical Analysis of Theory and Practice, by Paul F. Wendt, Ph.D., published in 1956 by Henry Holt and Company, can be summarized as follows: 

§         Market value should be viewed as the central concept in real estate valuation.

§         Market prices are the most reliable indicators of market value, and market comparison should be the most important criterion of value.

§         The replacement method has only limited and special applications in real estate valuations.

§         The most significant element in the replacement-cost approach is the estimate of depreciation or appreciation.

§         The observed-condition method, which relies heavily upon the comparison of selling prices between a new property and the older subject property, is the most reliable method of estimating depreciation.  This method brings the replacement-cost method into a closely dependent relationship with the market-comparison method. 

John D. O’Flaherty, MAI, SRA, a strong supporter of the cost approach, made the following observations: 

“The Cost Approach is market-oriented.  It involves market data of cost, site sales, and purchaser reaction to differences among properties to provide the basis for depreciation charges.  The Cost Approach is a comparative approach; the data and market behavior used as the standards for the subject property are provided by other, similar and competitive properties.  The appraiser’s judgment is required in making adjustments for property differences, and in estimating the several elements of accrued depreciation.  Formula approaches are inappropriate and potentially misleading.  Analytical comparisons, not mathematical formulas, are necessary to apply the Cost Approach properly.  The appraiser must constantly turn to the market for justification for adjustments and charges.”  [An Appraisers Dilemma, by John D. O’Flaherty, MAI, SRA, The Real Estate Appraiser, February 1969] 

Special purpose property.  This classification is ambiguous, misleading and should be changed.  What was intended to define certain properties that rarely sell has been inappropriately defined. Every building constructed was built for a special use.  Apartments, hotels, and office buildings are all constructed for a special use.  The property that is more specialized in use than any other is the single-family dwelling.   

The following is from Sanders A. Kahn, PhD, SREA, in his book “Down to Earth,” page 100, where he states “When I ask an audience or my students for their opinion of the most specialized property, I rarely hear what I believe is the proper answer; namely a one family home with highly restricted zoning.  It can only be used for that single purpose.  It is, therefore, the most highly specialized of all properties and truly a single purpose property.  Most of our other so-called special purpose properties have substitute uses that can be applied to them functionally and legally.  However, the one family home in a strongly zoned area can be used for a single dwelling residence only.  What we really mean when we talk about special property is a property with very few types of uses, and a very limited demand.  This, in contrast to the one family home, which has a very strong demand.” 

Some Personal Observations
In my forty years in the valuation arena, including a three-year term as Chair of the Kentucky Real Estate Appraisers Board, I have had the opportunity to view thousands of appraisal reports.  I find the following scenario to be representative of the norm rather than the exception. 

§         The cost approach is used regardless of the property type, intended use, age, condition, neighborhood or the property interest valued.

§         The cost approach is the first method employed in the analysis.

§         A cost publication is used to estimate cost new of the improvements.

§         The basis for depreciation is from the age/life tables in the cost publication.

§         Accrued depreciation is lumped under the physical depreciation category.

§         Rarely is there any reference to functional and or external obsolescence. 

§         The result produced by the cost approach, with few exceptions, is always greater than the results produced by the sales comparison or income analysis. 

§         The cost approach and sales comparison approach are inconsistent relative to adjustments, especially adjustments for age/life and basement contribution.

§         The cost approach is seldom afforded any consideration in the final value opinion.

§         There seems to be little distinction between the residential or general certification of the individuals in development of the value opinion.  

The one area that practitioners seem to have problems is the inconsistency in adjustments based on effective age-remaining life concept.  For example, in the cost approach the depreciation applied to the improvement may be at $2,000 per annum but in the sales comparison grid the appraiser shows an adjustment for this factor at $1,000 per annum.  I believe the principal reason for such a difference is based on the appraiser’s use of age/life depreciation tables, without relating these tables to local conditions, indicating a different loss in utility that the practitioner fails to realize.  An example of this inconsistency is demonstrated on the following page. 

For purposes of discussion, assume the sale of a single-family residential property at $200,000.  From market sales, you can demonstrate the vacant site to be worth $40,000.  The age of the improvement is 20 years with the same effective age.  You conclude that as of the date of sale a reasonable cost to construct the improvement would be $210,000.  Now you can calculate the total and annual rate of depreciation.  You can also demonstrate the “market implied” total life new as well as the remaining economic life. 

Total Purchase Price                                                                             $200,000

Site Value                                                                                            ($40,000)

Improvement Contribution                                                                       $160,000 

Cost new of the structure as of the date of sale                                        $210,000

Improvement Contribution                                                                       ($160,000)

Total   Depreciation                                                                             $40,000

§         Annual rate of depreciation $40,000/20                                   =    $2,000

§         Implied Total Life new $210,000/$2,000                                  =     105 Years

§         Remaining Useful Life $160,000/$2,000                                  =     85 Years

§         Effective Age                                                                       =      20 Years           

Every cost publication I have viewed, implies the total life for single-family dwellings, rarely exceed 60 years. This is the “one size fits all” mentality that has pervaded this industry from the beginning.  A large number of appraisers have adopted this erroneous mechanical intrusion that simply is without merit. 

If the same analysis is applied using the age-life depreciation tables from the cost index, we arrive at the following conclusions. 

Cost to reproduce the structure new as of the date of sale                        =      $210,000

Depreciation from age-life tables – (20/60 x $210,000)                              =      ($69,993)

Depreciated Reproduction Cost of Improvement                                =      $140,003 

Annual rate of depreciation $69,993/20                                                    =      $3,500

Implied Total Life new $210,000/$3,500                                                    =      60 Years

Remaining Useful Life $140,003/$3,500                                                   =       40 Years

Effective Age                                                                                        =        20 Years 

Other than producing a misleading result, the most important aspect of market-derived depreciation versus age-life tables is the inconsistency of the building “value” or contribution.  In market abstraction method the contribution of the improvement does not change regardless of the differing estimates of cost new.  This is not the case in the use of age-life tables.  

For demonstration purposes, assume that the cost new estimate was found to be in error and the reasonable cost to construct the dwelling new is $220,000 – not $210,000.  Applying the market abstraction method the improvement contribution remains the same.  The changes will occur in depreciation and the useful life estimates.  

If the age-life tables are used the changes are reversed.  The effective age and useful life estimates remain the same.  However, depreciation and improvement contribution will change.  Multiplying the cost new of $220,000 by 33.33 percent indicates $73,364 for accrued depreciation.  Deducting this amount from the cost to build indicates the building contribution to be $146,674.     

The preceding example shows what occurs by ignoring market analysis.  When the actions of the market are ignored, erroneous results usually occur.  The appraiser simply cannot blindly use non-market information such as depreciation tables as a substitute for thorough market analysis and expect credible results.  This has resulted in some users, such as some departments of the federal government to prohibit the use of published depreciation tables.     

The estimating of depreciation by the use of published tables or age-life computation is to be avoided.  [Uniform Appraisal Standards for Federal Land Acquisition (2000)] 

Conclusions
In addition to the client requesting this method be included in the analysis, there are times that cost is of critical importance in the valuation process.  Cost is paramount in testing of financial feasibility. Two of the four criteria in highest and best use analysis are financial feasibility and maximum productivity.    

On a personal level I find cost very helpful in advising clients on proposed projects such as proposed residential subdivision, adapting improvements to function at maximum efficiency, proposed land use decisions, building removal, etc.  However, as a stand-alone method of valuation it seems to have more negatives than positives. The reasons for my objections to use of the cost approach are many.  My major objection is it has little, if any, reference to developing an opinion of market value. 

In my opinion, we have an industry in shambles and it appears the situation has yet to reach the bottom. While I realize that all the blame cannot be dumped at the feet of the appraisal industry, we must shoulder a large portion of the current problems – some we can solve and some we can’t.  

Following is an email I recently received from Larry Disney, Executive Director of the Kentucky Real Estate Appraisers Board, relative to this matter. 

“Can we ever get everyone operating from the same page of understanding the appraisal process?  Not the methods and techniques, but simply the process of regulation, requirements, etc.  The overall lack of understanding this basic process by the banks, mortgage groups, and other users of appraiser services is amazing.   

I no longer believe the fault is all upon the appraiser, the regulators or the professional associations.  The blame must be shared proportionately by the users of appraisers services, especially the courts, the lending agencies, state and federal agencies, Fannie, Freddie, attorneys, and others who either don't know, don't care or lack the time to learn the regulatory process.  Today there is no consistency for appraisal services within any of the groups I have noted.  Perhaps that is the way "they" want it!  If there is no standard or expectation of consistency, no one can ever determine finality for correct or incorrect.  

I hope this will someday change, especially for the young people entering this profession. But, I also know it will take a long time to do so, if ever.” 

Larry is the most dedicated individual to the industry that I have ever known, and the primary reason the KREAB consistently ranks as one of, if not the top, appraiser boards in the country.  I could not agree more with his commentary.   

To accomplish the changes needed to right the ship will require strong and decisive leadership?  The AQB has implemented the first step on a long journey – education.  There is no doubt that improvement in the education arena will be the most important criteria in helping to improve the industry.  However, if other changes are not implemented, education alone will not cause significant changes in and by itself. These needed changes are not new to the industry.  The likes of men such as Babcock, Ratcliff, Ellwood, Wendt, Dolman, Webster Collins, and many others have voiced the same concerns.    

It appears that the appraisal fraternity has failed to follow one of the most important economic principles – the principle of change.  Ellwood often spoke of change as the most valid of all the economic principles.  John P. Dolman, MAI, addressed many changes in the process in a 1968 article published in the Appraisal Journal-- “In this author’s opinion, the growing trend to reduce appraisal techniques to dogmatic technical formula has resulted in the creation of a dilemma.  What originally was an attempt to develop formulas, which interpreted the actions of people in the market, now, tend to be insulated completely from the market.”   

“We have taught ourselves into a corner.  Students and candidates are now expecting that the same rigid standards, which we are teaching in the classroom, will be followed in the field.  The inconsistency between the two has put appraisers at the mercy of their own dilemma.” 

Dolman goes on to say -- “A tragedy, in my opinion is not merely the blind use of the three approach concept, but the fact that it has found its way into detailed specifications prepared as a required format for all appraisals submitted to certain lending institutions, government agencies, and other buyers of large numbers of appraisals.  Such specifications and the type of thinking which engendered them should be carefully re-examined by all appraisers, including the growing group of men administrating the requirements of many large appraisal consumers. 

“There is some tendency to consider the most detailed and documented report as necessarily the most ethical and one lest responsible for a divergence.  Unfortunately, this is not always true.  A report, which on the surface seems well documented, instead may be a clever demonstration of an erroneous conclusion.  In some cases the assembly of a number of elements (such as rental value, vacancy rates, and a capitalization of the resulting mathematical income) in connection with a property which has little or no appeal to investment buyers in the market can result in a mathematically fascinating income approach, a delight to the reviewer, but a meaningless estimate in its relation to the elements of value in the particular property.  Appraisers should ask themselves more frequently, “Who would buy this type property and what would be the factors he would consider in arriving at a price he would pay?’‘ 

Among the indications of this problem are the following: 

·        The sacredness of the three approaches, correlation, and conclusion.

·        Standard detailed specifications for writing appraisal reports.

·        The feeling that divergences and unethical conduct can be solved through uniformity of reports and standard techniques.

Dr. Ratcliff said it better than anyone:  “It is my considered opinion that the intransigence of the appraisal function and a questionably methodology is largely explained by a reluctance to accept the reality of a viable alternative.  But there is an available alternative which is the only logical and defensible response to the needs of the appraiser’s clients and which is an expression of well-tested principles of economic analysis.  The following steps are required: 

1.                  An open-minded admission of past error.

2.                  Acceptance of the fact that most appraisal assignments are to predict the most probable selling price of the property.

3.                  Recognition that the only possible basis of this prediction is to be found in the observed market behavior of the past.

4.                  Perception of the appraisal function as economic prediction under conditions of uncertainty.

5.                  Extension and improvement of the collection and storage of market facts.

6.                  Application of existing scientific methods of economic analysis for the purpose of prediction and for measuring the reliability of prediction, and the development of new methods.” 

The industry failed to heed this advice and has suffered the consequences.  Appraisers must understand that if market value is what is being sought, the answer must come from the market – not from cost publications, age/life tables or mathematical formula.   

I complete this article with the same purpose for which it was started – attempting to give something back to an industry that has been kinder to me than I deserve.  As Dr. Kahn so eloquently said: “As appraisers, most of us regularly find ourselves in disagreement with others because we are expressing “an opinion of value.”  In defending these values we engage in controversy.  So we are all controversial by virtue of our chosen vocation.  Therefore, you are not expected to agree with all the thoughts that are expressed here.  But you and I must consider all the issues, understand them, and reach independent conclusions.” 

As to any hope of immediate improvement in the industry,  SEQ CHAPTER \h \r 1I am in total agreement with Dr Ratcliff who said – “In the absence of enlightened and courageous leadership, further progress may be slow, and for some time to come we may expect that most appraisers will be going through the motions of the three approaches—many of them with their fingers crossed.” 

About the Author
George K. Cox has a career spanning forty years as a practitioner, educator, regulator, and consultant.  He has extensive experience in the litigation field.  Cox holds the MAI, SRPA, and SRA designations from the Appraisal Institute in addition to general certification in Kentucky, Indian, and Illinois.  He is a licensed real estate broker in Kentucky and Indiana.  Cox  is a past Chair of the KREAB, past president of the Bluegrass Chapter of the Appraisal Institute and Chapter 56 of the Society of Real Estate Appraisers.   He has developed several courses and seminars in addition to his several years as an instructor on matters pertaining to real property valuation. He has been a guest speaker on a number of occasions.