Well, ladies and gentlemen. It's been awfully quiet around here. I hope that means everyone is extremely busy, billing for lots of hours and stashing lots in their 401Ks. But it's like letting a car sit idle; things start to rust and the tires get flat spots on the bottom. We need to drive Russ's discussion engine around the block a few times.

4/6, #534, http://tree-tech.com/board/?topic=topic1&msg=534 I posted a thread about depreciation in TF vs CoC. There were thoughtful responses from Favero, Russ and Kerry.

I'd like to suggest that tree appraisers need to carefully distinguish FACTUAL determinations from METHODOLOGICAL differences. Whether a plant is likely to be replaced (quality of neighborhood, is there anyone to sue, placement of plant, etc.) for example, is a factual determination. It may require judgment or assumption on the part of the appraiser - as distinguished from physical measurement - but it's based on the facts of the case. If the appraiser chooses to use one method or another because of that assumption, it's not because of the method it's because of the facts. (Allowing that different methods may be more or less suitable for different facts patterns).

The various methods - particularly within one approach (remember TF and CoC are both COST approaches) - start out neutral on the facts. If assumptions are made they should be explicit in the analysis and clearly stated, not implicit and merely part of the appraiser's process of selecting methods.

If the appraiser uses TF to value a 24" tree then depreciates the initial indication of value by 50% location factor because it's not a well placed tree, CoC should be applied similarly. Calculate "cure" with a) a 24" tree (even if not routinely available) or b) a number of smaller plants to approximate lost physical benefit or function. Then depreciate similarly by Location factor to reflect poor placement or actual, experienced benefit. If the appraiser implicitly decides that something less than physically equal replacement is 'reasonable' or 'equitable' the $ result might be the same but the facts have not been clearly stated. The methods have not been consistently applied and do not appear neutral on the facts because not all the facts have been stated.

Reply to post by Scott Cullen, on June 10, 1999 at 07:15:27:

I assume you have made the assumption that the difference between assumptions and facts is clear.

I prefer to talk about these things in terms of clear facts and "judgement calls". Am I missing what you are talking about as far as assumptions are concerned?

On one hand, I think it is a mistake to assume that property is intended to be used in the way you find it. That can be an assumption that can come back to haunt. The trees, and the land can present quite a few facts to the plantsman, but in my opinion, a thorough interview with the property manager (potentially neighbor too) is an important step in a site visit.

In your example, you're talking about cost of cure and trunk formula methods (I'm assuming that's what TF and CoC means) :^) [couldn't resist] I'm not so sure I agree that the location rating is always a constant though. If cost of cure includes replacement of the casualty with trees, the client has opportunity to perfectly place the replacement, but with smaller (an assumption on my part, depending on the circumstances) plant. Wouldn't the facts in my example be that the casualty was replaced with smaller material, but was more suitably located, so a very similar value between the casualty and replacement has been achieved. You do the trunk formula on the casualty and the replacement cost, etc. on the cost of cure and compare them, then declare the difference.

Am I talking about the same thing you are?

Best regards, Happy Summer,
KWK

Reply to post by Kerry, on June 10, 1999 at 07:15:27:

You're right facts and assumptions should be clearly distinguished. The appraiser's assumptions or judgments should be explicit, that is purposefully made and clearly stated. If the appraiser assumes, for example, that a tree is not likely to be replaced (say poor placement) and uses CoC with a plant of 10% size compared to original and does not explain why that judgment was made then the assumption and the depreciation were implicit.

What I'm suggesting is that there should be consistency across methods - even if the appraiser chooses only to use one of the methods in a particular analysis. TF forces the appriaser to be explicit. That same situation would have applied a 10% location factor. Using a 10% size plant is the same depreciation applied a different way. What I'm saying is that the reasoning should be explicit and for consistency's sake expressed in the same terms across methods. If you use a 5% plant and put it in a better location you're still depreciating a full size plant to reflect your assumption or judgment that placement was poor and replacement in place unlikely.

You are 100% right in my opinion about owner/manager interviews. Those opinions and intentions are absolutely part of the fact pattern. You have to be careful that they might be lying to inflate a potential award, but you can use other facts to screen for that ('oh yes, we're very concerned about the impact on our property value with that tree gone, it was very important in the landscape and we've been thinking about selling the house;' but there's a dead car on the lawn, been there so long a 4" sapling's growing up through the sun roof, ugly storm damaged snags in all the remaining trees, peeling paint, broken windows.) Neither the facts nor a good appraisal can be limited to only the physically measurable stuff. At the very heart of the matter is the reality that value itself is NOT a physically measurable characteristic.

I think we are talking about the same things. But I think if all adjustments are both consistent and explicit across methods then a) the results are easier for the appraisal user to understand, b) $ differences between methods might be minimized and c) remaining $ differences are easier to explain.

Reply to post by Scott, on June 12, 1999 at 01:07:08:

OK, I get it. Keep talking. What is your opinion, where do appraisers go wrong most often? If we were to name the 5 most common mistakes plant appraisers make, what would those 5 be?

I agree that location and condition factors are often key in TF calculations, and ommitted from consideration when looking at replacement and/or cure. Why do we do that? Lazy? Didn't tie the whole picture together properly in our minds? Poor documentation?

Best regards,
KWK

Reply to post by Kerry, on June 13, 1999 at 06:12:50:

Location factor is often 'overlooked' because it is (careful here) implicit when the replacement plant is put in the same place. I would be hard-pressed to explain why there would be a difference in location factors when you replace an ash with an ash in exactly the same place. We make the assumption that the replacement goes there, the location factor balances and becomes implicit, and we 'overlook' it as a factor sometimes when it should be considered.

Condition factor is a bit more complex. E.g. I planted a tree 30 years ago, and it now has a condition of 75 percent. It is destroyed. The appraiser chooses to replace with a smaller tree, but does not adjust for condition. You plant a new small tree in excellent condition, but that new tree will (we ASSUME) receive the same level of care the other tree received. In 30 years, can't we reasonably expect the replacement to have a condition factor of 75 percent? Should we discount the replacement now, knowing it will not receive a higher level of care?

Reply to post by Kerry, on June 13, 1999 at 06:12:50:

RE: PAR. 1. Whoaaaa. Excellent question but goes way beyond the scope of this partcular thread. I'll have to give that some careful thought.

RE: Par 2. "I agree that location and condition factors are OFTEN key in TF calculations..." [emphasis added]. These factor are often key to reasonable determinations of value. Sometimes they are not (i.e. %ages are high) but TF ALWAYS forces the appraiser to explicity consider and enter them. Tree appraisal grew up with TF and that's where the culture developed. After being beaten up a lot on the witness stand - I think - the plant appraisal community started to focus more and more (and more and more and more) on the technical stuff within our expertise (condition). Then more recently Location was added (5th or 6th Edition I think) becasue values were often criticized as too high. But (witness the discussions in this forum) Location is not a physically measurable, technical characteristic. Appraisers have had a lot of trouble with it.

Truth be told, whether Location and to a lesser extent species really matter is a function of the facts and first of all the definition of value (as judged by the appraiser or imposed by court or law) and the purpose and use of the appraisal. There's a very strong theoretical case for physical depreciation through condition, but in point of fact the beneficiary may be much less sensitive to nuances of condition than the technically sophisticated appraiser and even that can be over emphasiszed.

But the three factors are in the analytical framework of TF, should be there and are a strong part of the culture and maybe the case law.

The literature, in my opinion, was very weak on explaining these depreciation factors and they continued to get appraisers in trouble. I think CoC emerged in many ways as an answer to that. It disposed of the troublesome Species and Location ratings. I think you've hit three explanations:

a) not really lazy, but often tree appraisal is a very small part of a person's revenue stream and it's hard to justify the expense of learning and staying current on a skill set that's 5 times more complex than that simple formula you just plug measurements into and apply ratings from a table someone else made up into. And it's often hard to justify an analysis that's more expensive in appraiser time than the plant might be worth. Problem is the culture has evolved around a useful average methodology skewed towards the lowest common denominator. And where people get in trouble is on more complex, high value cases exposed to great scrutiny where the methodology and literature and training don't support them.

b) "Didn't tie the whole picture together properly in our minds?" Bingo!

c) "Poor documentation?" The documentation has been prepared by skilled plants people not skilled appraisers or ecomomists. In the case of CoC it's just evolving and I think hasn't reached it's maturity. Hopefully a lot of this gets addressed in 9th Edition.

See response to Russ's post today's date for more.

Reply to post by Russ Carlson, on June 13, 1999 at 12:06:07:

RE: LOCATION. Remember Russ, this thread started about factual vs. methodological determinations. The principal difference between TF and RCM (and CoC if you limit it to a replacement plant) is size of plant. We select RCM if the plant is of replaceable size. It's easier and less hypothetical. If the plant is in the middle of the front lawn, liklihood of replacement is high and Location is probably 100%. If the plant is on the other side of the hill across the swamp and out of view, who cares? Maybe location is 10% or less. These are factual determinations. They are not inherent in the method. If you use the cost of a 10% size plant to achieve the reult you're still making the adjustment for Location and it should be explicit.

RE: CONDITION. An awful lot of variables in your example. I'll dispose first of the "discount for maintenance assumption." I think I'd most often assume things will be the same in terms of future maintenance unless there are compelling facts to the contrary.

As to the rest, start with the basic assumptions. This is a cost approach to value. An appraised plant's value is assumed to be what it can be replaced for. But the replacement is assumed to be in "ideal" condition. The appraised plant has suffered 25% physical depreciation (poor form, weak structure, short remaining life, whatever). So we must reduce the cost of the ideal replacment by 25%. Whether we do that by using size for size replacement cost x .75 or .75 size replacement cost x 1.00, the result is the same. If we mix the balance up and say use a .90 size replacement x .83 the result is still the same, we've assumed 75% condition of appraised plant and depreciated by 25% for condition. These adjustments should be explicit and clearly distinguised from other adjustments.

As an aside we need to take a careful look at the "ideal" tree. We've evolved a set of techniques whereby we identify and depreciate for every bump and blemish and bug because we can. But in nature is there a perfect specimen? If we're appraising a 100 year old peanut butter and jelly tree or Bazooka Bubble Gum tree (I know a guy who planted one for his kids, kids are in their 40's now and still believe it) and estimate the cost of a 100 year old size for size replacement we should be looking at the typical condition of the 100 year old specimens of that species. The appraised plant should not be depreciated for conditions which are commonly found in the typical replacement of the same age. Life expectancy of course is the exception, if the remaining life of that typical specimen is short depreciation should apply to all of them.