Important Foundational Concepts.
Welcome to the 2020 Appraisal Journal. Although events continue to unfold, we know a challenging and unpredictable year lies ahead of us. Appraisal professionals will be called upon to use their in-depth understanding of valuation theory and markets to provide clients with the best information possible. We urge you to consult Appraisal Journal articles as well as other Appraisal Institute materials to aid in developing solid responses to complex situations.
In the current issue, you will find discussions that dig into concepts that underpin valuation methodologies: reliable comparable analysis and the nature of market rent.
The first feature article, "Principles for Calculating AVM Performance Metrics," looks at automated valuation models (AVMs), their analysis of comparables, and how AVM performance metrics are calculated. These performance metrics are important indicators of the accuracy and reliability of AVMs. The study demonstrates that the calculation of performance metrics is not standardized and tends to overstate AVM reliability. The article suggests best-practice principles to improve calculation of performance metrics as well as the performance of AVMs.
The second feature article, "Long-Term Leases: Rent Reset Analysis," examines the process of periodic rent resetting where there is a long-term lease. The analysis in such assignments and the ultimate opinion of value depend on the property right to be valued, as indicated in the lease language. The article summarizes a sample of rent reset cases and explores solutions to rent reset valuation challenges.
The third feature article, "Revisiting Market Value and Market Rent," explores the evolution of appraisal's fundamental terms, market value and market rent. The components of each term are discussed and the ramifications of vague phrasing are illustrated, with revised definitions proposed.
As always, we welcome your comments regarding any aspect of The Appraisal Journal.
Stephen T. Crosson, MAI, SRA
Editorial Board Chair and Editor-in-Chief
The Appraisal Journal
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|Title Annotation:||From the Editor-in-Chief|
|Author:||Crosson, Stephen T.|
|Date:||Jan 1, 2020|
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