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What does USPAP say about analysis? Specifically, nothing. But it does admonish appraisers to identify it first, and then to analyze it. OK, what does that mean? A clear example is the number of bedrooms. If the “typical” house in the neighborhood has three bedrooms, does a fourth bedroom add any value? We can’t analyze the market’s take on that extra bedroom if we don’t know its there. We can’t determine if that extra bedroom is a functional obsolescence until we identify how may bedrooms the market is willing to purchase. We can’t conclude how much that 4th bedroom adds until we have analyzed that market.
How many times does a report state the highest and best use is the subject’s present improvements? Really?! How? Why? First, you have to identify it to analyze it, right? It’s not hard to identify a house, is it? But highest and best use is more than merely the physical presence of the house. What are the economic characteristics of the house? What are the legal characteristics of the house? See? You have to identify them, then analyze them. You can’t discover the value the market assigns to a legal characteristic until you first identify that characteristic.
So, in this podcast we cover “identify it then analyze it” as a preliminary step in any appraisal process. And speaking of the appraisal process, there are five steps to it. You have to identify ’em to analyze ’em!
Thanks for listening!
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