Commercial Grade is a post by John Cicero, MAI who provides commentary on issues affecting real estate appraisers, with specific focus on commercial valuation. John is a partner of mine in our commercial real estate valuation concern Miller Cicero, LLC and he is, depending on what day of the week it is, one of the smartest guys I know.
By definition appraisers are supposed to stand for independence and objectivity. However s recent article in the New York Times highlights yet another avenue where pressure is borne on appraisers..those providing litigation support and expert testimony. The appraiser’s role in the mortgage lending process has the focus of much attention over the past months, with the appraiser once again being held responsible for lack of spine and flexible ethics in the face of pressure from banks and mortgage brokers. In the article, In US, Expert Witnesses are Partisan, author Adam Liptak highlights the process of retaining “neutral” experts in US courts. He writes,
In most of the rest of the world, expert witnesses are selected by judges and are meant to be neutral and independent. Many foreign lawyers have long questioned the American practice of allowing the parties to present testimony from experts they have chosen and paid.
Hmm, this sounds familiara potential conflict of interest in providing an impartial opinion to the person paying your fee.?…where have I heard that before??
The American system becomes somewhat of a farce, or is at least perceived to be. Each side picks a “hired gun” to advocate its side and then the judge, after listening to hours, or days, of technical talk, ends up deciding something in the middle. The presumption is that both sides have already exaggerated their positions to an extreme and therefore the real answer lies somewhere in the middle.
Mr. Liptak continues in his article,
Juries often find it hard to evaluate expert testimony on complex scientific matters, many lawyers say, and they tend to make decisions based on the expert’s demeanor, credentials and ability to present difficult information without condescension. An appealingly folksy expert, lawyers say, can have an outsize effect in a jury trial.
The same is clearly true for judges as well as juries. Judges cannot differentiate a “good” appraisal from a “bad” one so it all comes down to how the expert comports himself/herself on the stand. Being a good witness is for the most part, a different skill set than being a good appraiser. Being a good appraiser and a good witness is rare and a winning combination.
I recently learned a new term that I think should become the law for all valuation related disputes, baseball arbitration. In baseball arbitration, the arbitrator or judge ultimately sides with one party or the other, no splitting the baby down the middle. This would be a powerful incentive to get it right and not conclude to anything too extreme.
In the meantime, for those appraisers who give testimony, don’t forget to speak clearly and make eye contact!