Performance Perspectives Blog

Appraisal institute chimes in

by | Aug 5, 2009

The Appraisal Institute announced that they endorse more frequent valuations of real estate properties, as was proposed in the GIPS 2010 draft (see for more details).

Perhaps I’m wrong, but I liken this to verifiers endorsing mandatory verification. Would appraisers benefit financially by more frequent valuations? I suspect they might.

When mandatory verification was proposed, we, as well as just about every verification firm who commented, opposed it. To do otherwise would have been self serving. Verifiers didn’t offer their comments in a disingenuous manner, but truly could justify why they opposed such a move. We totally support verification as we believe that it’s extremely important that firms that claim compliance with GIPS(R) undergo such a review. But in the end, we believe it’s up to the firm to decide if they want to spend the money.

We questioned the need for more frequent appraisals of real estate, as proposed by the GIPS Executive Committee, because of the added cost it would bring. Currently firms claiming compliance must have properties valued by independent parties once every three years; the proposal is to increase this to annual.

In their announcement the Appraisal Institute makes valid arguments in favor of the increased frequency of valuations. But, are they being truly objective and taking into consideration the financial impact such actions would have on the managers? Yes, we’ve seen significant changes in real estate properties over the past year, but would we not believe that the asset manager would adjust their valuations accordingly?

Perhaps I’m being unfair in my questioning of this position and therefore welcome your thoughts. This organization has a role in the industry and felt it important to offer their opinions. Perhaps their views are totally rational and without any bias. Perhaps their focusing more on the owners than the managers. Again, your comments are welcome

Free Subscription!

The Journal of Performance Measurement

The Performance Measurement Resource.

Click to Subscribe