Should an Aircraft Appraisal be Accurate?

Before getting too far into this topic, credit needs to be given to Tim Andersen of The Appraiser’s Advocate who released a podcast on this topic albeit more directed at real property appraisals versus aircraft appraisals. In the past, Tm has instructed aircraft appraisers on proper use of USPAP (Uniform Standards of Professional Appraisal Practice) methodology as it applies to aircraft and the topics he presents also apply here. I was working on this article when Tim dropped this episode of his podcast.

He raised a number of good points to include. So, what is the real issue with an “accurate aircraft appraisal”? I bring this topic up because I routinely see ads which tout that their aircraft appraisals are the most “accurate” in the industry or they ensure “accuracy”, but that claim is misleading and incorrect. An “appraisal” by definition, is an opinion of value and what the professional aircraft appraiser provides to their client is an appraisal report which contains the details behind the final conclusion or opinion of value. Therefore, an opinion by itself is neither good or bad, right or wrong, accurate or inaccurate. It is simply an opinion that is well formed or not. Nothing more and nothing less. Therefore, the term “accurate” should never be used to describe the term “appraisal” because there is nothing to measure the opinion against – and the final opinion of value is not really the issue anyway.

Because the aircraft appraisal is an opinion, to be properly evaluated there must be unbiased analysis, unbiased facts and unbiased conclusions OR something less substantial. In other words, the analysis gets down to the credibility, reliability and believability of the supporting information or in this case, the appraisal report.

I have witnessed two professional aircraft appraisers look at the same aircraft and review the same material only to come up with to vastly different values. The final results or opinions were not even close. How could this be? One appraiser happened to find out about repairs from a major damage event that were not well documented in the logs. That appraiser happened to be more methodical in their research which lead to different results AND very different reports. Were the other appraiser’s results inaccurate? This really is not the question to be asked. The question the client should be asking is, why are the results so different and how did each appraiser arrive at their respective results?

Followed by – which report (and related analysis) is more believable and credible? In my opinion, I think what these ads touting “accuracy” are really trying to say is that they will be closer to a predetermined result or price before even knowing what that price is or how it was determined.

WOW! Think about this for a second because one key objective of the Professional Aircraft Appraisal Organization (PAAO) is to ensure public trust – and this is also true of The Appraisal Foundation. So, with that objective in mind, how can ANYONE predict that they will be “accurate” in regard to their opinion before they know anything about the property in question and have the necessary data to form an opinion? The answer is, they cannot unless they plan to issue a predetermined result. Is that what a client really wants? Sometimes, yes!

In this line of business, sooner or later someone from the banking industry will approach an appraiser stating that if you want THEIR business, their reports must come in at the level they specify. Unethical? Yes, but who are you going to report these folks to? And yes, I have been approached with this “offer” too – but in reality, it is a false choice of options and easy for me, at least, to reject. The appraiser chooses their clients and this type of client is not one that should be sought out if the appraiser’s objective is to have a reputable business.

The point here is to understand what the ad or aircraft appraiser is offering. Individuals who guarantee accuracy may be acceptable for some who just want to do the deal. In other cases, individuals are less concerned about a specific number and more interested in the overall findings.

The camp you fall into depends on who you hire.

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