The independence of appraisers is a minor but important component for any industry. Accurate appraisals are a critical piece to any “free market” and that includes the market place for vessels. An accurate and independent appraisal is additional ballast to keep a boat deal stable, a small contribution to the righting moment. They help all sides, without prejudice. Appraiser independence is quite simply a financial and business application of THE GOLDEN RULE.
The slow healing wound in our economy is a painful reminder of problems with a lack of appraiser independence. An oversimplification? Perhaps, but it’s widely suggested that prior to the recession, real estate appraisers largely lacked independence and were instead catering to the market. One consequence is a major modification in the appraising of real estate in the United States. The government has mandated a change back towards independence. This mandated independence has resulted in increased bureaucracy and appraisal expenses.
Marine surveyors are the appraisers in the vessel market place. Market value analysis is the normal appraisal method used to appraise boats. It is an attempt to determine at what sale price an educated buyer and a non distressed seller will agree, i.e. “the fair market value”. An independent appraisal is based on comparable reported sales and listing prices and other relevant data. The value is determined by an unbiased and disinterested analysis of that data.
In our opinion and in most cases this data should be available to support the appraised value. The appraiser/marine surveyor’s client deserves an explanation of how the data resulted in the appraised value. While the marine survey or appraisal report is performed on behalf of a client, all parties to the transaction should have confidence in the independence of the appraiser. Without independence, trust is lost and without trust the value of the appraisal is… well you know what it is. You don’t need an appraiser for that.
An independent appraiser is not an advocate for a specified value. We often entertain a party to a transaction armed with data supporting their specific opinion of value. This data is often focused, narrow and exclusive of other relevant but contrary data. We have been sent old listings with asking prices which have been lowered several times by parties seeking inflated values and short sale and repo comps when seeking lower values.
The bad news is that boat values went down in 2008. The great recession, perhaps partially attributable to “captured” appraisers, cost the marine market place dearly. The good news is values are trending upward (organically, not artificially). With industry support for appraiser independence let’s keep it that way.