Which to employ? This question has come up over the years in may forums and it came up in a discussion recently. I've not found any treatment in the literature, so here's my take on it.

TREE APPRAISAL: WHOLESALE, RETAIL OR INSTALLED COST?
(C) Scott Cullen, 1999

In the Trunk Formula Method (TFM) of tree appraisal a replacement cost is used to develop an indication of value. The Guide for Plant Appraisal, 8th Edition (CTLA 1992, 57) suggests that "...the most appropriate cost.....could be either the wholesale, retail or installed cost DEPENDING ON HOW THE TREE WAS GROWN, MARKETED AND TRANSPLANTED [emphasis added]. If a regional group has not determined which cost is most appropriate, the appraiser must do so until such a cost is established."

Various regional groups have determined that one or another particular type of cost is most appropriate. Many individual appraisers routinely use one particular type of cost as most appropriate. Consideration has reportedly been given to specifying the use of wholesale cost in the Guide for Plant Appraisal, 9th Edition.

Nothing in the tree appraisal literature, beyond the brief 8th Ed. text quoted above, appears to discuss how or why this determination is made. This article suggests a rationale for making the determination.

BACKGROUND. TFM is a depreciated replacement cost (DRC) approach to value. It assumes that the benefits inherent in a plant are replaced if the plant is replaced and that replacement cost provides an indication of value for the plant. TFM assumes that a damaged party is made whole by replacement. To the extent that replacement cost overstates benefits - and hence value - the initial indication is depreciated or reduced to reflect actual benefits. (Cullen 1997, 1998) Cost data are distinguished from depreciation adjustments.

COST DATA (Cullen, 1999). Given these DRC assumptions, cost data inputs to a replacement cost model should be descriptive of the cost that would be incurred by the entity or party experiencing benefits or for a damaged party to be made whole. For example:

A homeowner or typical business owner may not have access to wholesale plant material and would not typically have the expertise, equipment or practical ability to transport and install a tree. They would incur an installed - perhaps guaranteed - cost with inherent contractor's markups, profit and overhead.

A nurseryman who experienced a loss would incur wholesale cost or less to replace stock.

A large owner like an estate, business campus, municipality, resort, university or other institution with it's own skilled staff, equipment and perhaps even it's own nursery would incur the plant wholesale cost plus labor and incidentals but not retail markup, installation overhead and profit, or guarantee costs.

The appraiser should select the most appropriate measure in establishing replacement cost. Note that these are DEMAND side considerations. They are not supply side considerations as suggested by the 8th Ed.

DEPRECIATION. If the most descriptive cost data result in an indication of value which, in the appraiser's judgment, is high then it should be reduced by explicit depreciation adjustments - the Species, Condition and Location factors in TFM. If the appraiser uses or a group mandates cost data which are not descriptive of the cost to be incurred so as to reduce the initial indication of value there are a number of problems.
1) Even if the downward adjustment is generally called for, it is implicit depreciation. It may not be explained to the appraisal user.
2) Even if a downward adjustment in cost data is explicitly explained it is not consistent with the explicit application of depreciation - Species, Condition, Location - in the basic TFM model and will make it confusing to compare different appraisals.
3) If a cost input is not descriptive it may ignore actual facts and result in a lower indication of value than is actually justified. This may be compounded if additional explicit depreciation adjustments are made through the usual factors.

FACTUAL vs METHODOLOGICAL DETERMINATIONS (Cullen 1999). Appraisals must be based on facts. Appraisers must always consider facts and make judgments accordingly. Factual determinations must be distinguished from blanket, methodological determinations.

EXAMPLES. Say an appraiser's judgment is that a damaged plant is not likely to be replaced because it provides minimal benefits or "won't be missed." A DRC model starts with the replacement cost most descriptive of the cost that would be incurred to replace the plant. Likelihood of replacement has nothing to do with the cost of replacement. A low likelihood of replacement is a fact determined in the case. It should be reflected by an appropriate depreciation adjustment to the cost, not a distortion of the method or underlying model. This of course means that the amount - % rating - of depreciation will vary from a plant which is likely to be replaced. The appraiser should be able to explain and justify this explicit adjustment. An inability or unwillingness to explain varying adjustments is a poor reason to reduce cost data inputs as an alternative, even if the final value conclusion would be the same.

Say an appraiser is determining value for a plant which is to be protected during a construction project. If the plant is destroyed the owner will incur an installed cost to replace its benefits. The benefits would be missed and would be replaced if it was destroyed. A regional group has mandated that only wholesale costs are to be used. The appraisal will A) result in a value which is lower than what is justified or B) will need to make smaller depreciation adjustments than the facts otherwise call for to bring the result up to a justified level. In ether case the model is not descriptive of the facts.

CONCLUSIONS.
1) Blanket selection of wholesale, retail or installed costs by national or regional groups or by individual appraisers ignore the basic assumptions of a DRC approach and the facts of individual cases.
2) Selection of wholesale, retail or installed costs should always be a fact based determination made by the appraiser in a given appraisal.
3) Selection of wholesale, retail or installed cost is based on demand side rather than supply side considerations. The 8th Ed. reasoning is faulty in this regard.
4) All depreciation adjustments should be explicit and properly explained and justified by the appraiser.
5) All appraisal models should be applied consistently from case to case. Facts, judgments and adjustments properly vary. They can only be understood properly if presented in a consistent framework.

SOURCES.

CLTA 1992. Guide for Plant Appraisal 8th Edition. Champaign, IL: ISA.

Cullen 1997, 1998. Tree Appraisal: What is the Trunk Formula Method? Abroricultural Consultant, September-October, 1997, 30(5):3ff; http://www.tree-tech.com/cullen-tf.shtml, 1998.

Cullen, 1999. Comments On 12/98 Draft Guide for Plant Appraisal, 9th Edition. Unpublished memo to CTLA, January, 1999.

Cullen, 1999. Factual Vs. Methodological Determinations. Thread on Knothole. http://tree-tech.com/board/?topic=topic1&msg=593

Reply to post by Scott Cullen, on October 10, 1999 at 11:31:13:

Say a tree is appraised using wholesale cost and depreciated through the S-C-L factors and comes to $X.

But, the homeowner would have had to pay installed cost to get the tree replaced, so wholesale is not descriptive (fails one prong of the three prong test I've suggested in the preceding article).

Installed cost, by widely supported rule of thumb is, typically 2.5x wholesale. So using installed as descriptive data input, the initial indication of value will be 2.5x what you get using wholesale. So to get the same final result - $X - depreciation will need to be higher.

Say Wholesale based cost is $1,000, S=100%, C=75%, L=80%. Value = $600.

If Installed = $1,000 x 2.5 = $2,500, S=100%, C=75% then pre-L depreciation Value = $1,875. So, ($1,875 x ? = $600) = (? = $600/$1,875) = (? = 32%). Alternatively, 80% / 2.5 = 32%.

So, $2,500 x 100% x 75% x 32% = $600.

This may seem inconvenient or confusing to an appraiser who is accustomed to using uniform, blanket depreciation %ages, partciluarly if they come form some regional average or guidebook. But it is descriptive of what is actually going on. If the appraiser "knows" that using L=80% and installed will result in a high final value so they choose wholesale to get it down, then they "know" why it's high and they should be able to reflect it in L=32%. If they don't really know and they just want it to come out using typical %ages, can they really explain the process?

The rationale applies to whichever fator is causing the reduction in value from initial cost indication. Maybe L=100% and C is the real problem. That's just math.

Starting with descriptive data inputs forces the appraiser to understand, explain and justify depreciation adjustments. It provides more descriptive and useful opinions to the appraisal user.

Reply to post by Scott, on October 10, 1999 at 11:31:13:

Or maybe L=80% and using wholesale cost has undervalued the tree by ($1,875 - $600)= $1,275. Maybe you know that, but feel constrained by your regional group's mandate to use wholesale. Trouble is if you make L=100% - as high as you can go - you can only bring value up to $750. Still short changing the tree by $1,125. What to do?

Or maybe you don't recognize it, just routinely follow your regional group's mandate. You feel OK but tree is still under-valued. Have you made a professionally competent and objective appraisal?

Reply to post by Scott, on October 13, 1999 at 11:15:30:

Just a short note concerning installed costs. It has been long though that 2.5 is a rule of thumb.
When the eighth edition came out letting regional groups determine local costs, the Rocky Mountain Chapter ISA questioned twenty to twenty-five landscape contractors concerning the installation multiplier.
We asked two questions, first what multiplier do they use when bidding one tree, and second, what do they use when bidding fifty trees. We then averaged the two and found the result to be 2.51 times the cost of wholesale.
I have informally questioned local contractors every year when I update the chapter costs and found that this number is still good after 9 years.

Reply to post by Scott, on October 10, 1999 at 11:31:13:

I don't concur (at this point) with the line of reasoning here. The way I interpret what you've said is that we vary the ratings for site or condition, depending on which cost basis is going to be used??? Yes, I am confused by that. I'm well aware of how the numbers can be manipulated, but this seems an intentional mis-use of the formula.

My arguement goes like this (we've been here before, Scott):
The homeowner gets the same cost basis as everyone else. The TFM extrapolates the cost of growing a small tree to large size. Since we have a difficult time estimating the actual cost of commercially planting a tree and caring for it throughout its life, we must use other avenues to determine those costs. To do that, TFM takes the cost of a nursery tree, based on $/sq.in., and extrapolates that to the large tree. When the tree is grown in the nursery, it requires a certain amount of care, and that translates into labor/equipment/overhead charges for the grower. Those costs are reflected in what the grower charges for the saleable tree, and form the basis of the Basic Cost ($/sq.in.)

The cost of transporting the young tree to the site, professionally installing it, applying mulch, etc., are not part of the cost of growing a tree. They should be kept separate. The 8th edition did this, by taking out Replacement Cost and treating it separately. In effect, it treated the whole large tree at the rate selected (wholesale, retail, installed), and then added back the additional costs for markup.

As an example, let's say I just ordered a new Porsche (don't I wish!). The dealer places the order, gets the right color and the right wheel covers, all the extras, and delivers it on Tuesday. He charges $400 for the delivery. On Wednesday I decide to sell it, 'cause I don't like the burlwood dash. How much can I sell it for? Assuming a buyer is willing to pay the value of the car, and it hasn't moved an inch since it got off the truck, he won't pay the $400 delivery charge- that's not part of the value of the car. That was value added, to satisfy my busy schedule.

Same with shipping charges when you order online. You could go down to Kmart to buy that toaster, but you find it more convenient to have UPS drop it on your porch. The value of the toaster is not more because of the shipping charges. If it is damaged, you may be entitled to reclaim those costs as part of the settlement, but it is not part of the value.

So, why should the value of a tree be different because of who it is planted for? We deal with depreciation for location (SCP) and condition. Those factors are what they are, and will not change because one homeowner is hale and hearty can can plant the tree himself while another homeowner can't get out of her wheelchair.

These other costs can be factored in, but should not be taken as part of the TFM or the value of the tree. They should be considered and treated separately.

I have no problem with CTLA specifying which cost basis to use (as long as they agree with me ). I think, if properly explained and understood, it will help bring more uniformity to appraisal, with less of the widely divergent numbers we see. I don't suggest that all appraisals should come out the same, just that the playing field should be level.

Reply to post by Russ Carlson, on October 13, 1999 at 11:15:30:

We seem to fundamentally disagree - for the moment at least - about how TFM as a Depreciated Replacement Cost (DRC) approach to value attempt to provide an indication of value.

Start with some basics... value is a function of benefits and benefits are a function of the beneficiary. We've heard all the arguments about how that's unfair, why should a tree in Berverly Hills be worth more than a tree in Dogpatch. But that's often the way it is. The notion of benefits differing is why Location was introduced in the 5th Ed. (More on this later). DRC says, OK we don't know what the benefits are but we can assume that if we replace the thing (house, tree, car, whatever) we replace the benefits. The beneficiary gets value back, is made whole. In my opinion that replacement cost should be the cost that the beneficiary or damaged party would incur to be made whole. That is descriptive, it intuitively makes sense. The homeowner doesn't much care how Weyerhauser grew the trees and what their costs were. The homeowner doesn't go out the the forest and buy it on the stump and harvest, mill and transport it. The homeowner pays for lumber and nails and pipes and shingles...... delivered to the site and turned into a replacement house plus labor plus contractor profit and overhead. My opinion is based on the way DRC is traditionally and typically applied in a vast body of R.E. appraisal literature. I think that's the way it's applied in the Uniform Standards of Professional Appraisal Practice as well.

I'll go back and look at 8th TFM again, but it seems to me that, based on appraiser judgment, the entire cost (wholesale, retail or installed) is extrapolated out to the size of a large tree. TFM is a surrogate for cost data we don't have. If you could get a 30" tree say, and have it dug wrapped and transported by a giant helicopter to your hilltop home you would get actual costs for that from a contractor and that's what replacement cost would be. Getting a 30" sitting in the nursery and then the installation cost for a 4" tree does not - to me - seem to make you whole.

Depreciation is critical in application and it is where appraisal skill and judgment really come in. It is supposed to vary as needed to reflect facts. To answer your question the VALUE of the tree may or may not vary based on who it's planted for. My point is COST may vary by case and it's the cost that would be incurred in the case that should be the starting point. Maybe VALUE turns out to be the same - requiring different depreciation adjustments - or maybe it varies with COST. Maybe it varies from case to case for reasons unrelated to which type of cost is applicable... say two cases start out with the same installed cost. But Location factors differ so VALUE varies by who the tree is planted for, that's accepted right now in TFM and properly so.

"The factors (C & L) are what they are they should not vary by owner." The factors are not cookbook factors or rating by type of site or look up table of contribution or placement. Depreciation is by definition a reduction in the initial RC indication of value to reflect benefits. It requires an understanding of those benefits and an appropriate reduction in costs... the most descriptive costs.

The big problem with using wholesale is that it may understate value in some cases. And there may be no way to make it up by applying less depreciation. If ONE cost basis only is going to be used then it should be installed cost... that's not descriptive either but at least a whole class of appraisals won't get short changed.

So, how to determine depreciation... how to get a handle on benefits? Well one way is to use reasonableness testing against property value if the definition of value is contribution to property value. 9th Edition is laying this out for the appraiser. Common sense things like liklihood of replacement and 'will it be missed?' are very useful.

I'm suggesting that the level playing field should be descriptive and consistent methodology supported by widely accepted practice, not uniform adjustments so it looks like we're on track.

There is a valid question of whether the appraisal addresses the value of the plant or the value of the damage... staying with the plant right now and leaving out separate classes of damage like hardscape. Say it's value of benefits. Disney World may have a lot more benefits to replace becasue of lost revenue, implicit guest dissatisfaction, whatever, than a homeowner. But Disney World may have a lower cost of replacment than a homeowner because they incur a wholesale cost out of their own nursery and some in house labor to replace. Less transport than the homeowner and not markup, profit and overhead.

So you really need to look at the definition of the assignment. You may also want to take different approaches to value in the same case. DRC gives you one result. Benefits approach gives you another. Market approach, through paired sales analysis as set forth in 9th or whatever, may give you another. These might be reconciled to final opinion or all presented to the decision maker.

The problem is trying to make TFM a "one size fits all" model. It won't work if you try to say it fits all cases, particularly if you try to get everyone to make the same adjustments.

Reply to post by Russ Carlson, on October 13, 1999 at 11:15:30:

Russ, you posted "...grower [costs]. Those costs are reflected in what the grower charges for the saleable tree, and form the basis of the Basic Cost ($/sq.in.). The cost of transporting the young tree to the site, professionally installing it, applying mulch, etc., are not part of the cost of growing a tree. They should be kept separate. The 8th edition did this, by taking out Replacement Cost and treating it separately. In effect, it treated the whole large tree at the rate selected (wholesale, retail, installed), and then added back the additional costs for markup."

I'm not quite sure what your intended logic is here. As I read 8th Ed. TFM summary on p. 59, "Replacement Cost" (RC) is installed cost for the largest available replacement. No choice here, it's installed. The "Basic Price" (BP)(really a unit cost) is calculated using wholesale, retail or installed, and is multipled by the difference in size between the replacement and the appraised trees (size increment or SI). RC + (BP x SI) = Basic Value. (Species is already considered and C&L follow). All the markups, transport & installation costs, profit and overhead that are plugged in are extrapolated to the size of the appraised tree... if you use wholesale than that's all that' reflected in the SI, if you use retail, then only the markups, if you use installed, then all of it. Are we saying different things up to this point?

What I'm suggesting is that the selection has nothing to do with how trees are grown in a region as CTLA suggests, it should have to do with the cost that the owner or damaged party would incur to get the tree replaced.

There has to be an assumption here that the extrapolated unit cost is a reasonable description of or surrogate for real cost data if we had them. It may be. It may also be that installation cost actually increases in a non-linear fashion and should be a bigger component than is reflected. It might also be that the tree cost would not increase as fast as a linear extrapolated nursery cost... large stock might be available for the taking. To the extent industry research - like Bill Cassel describes or was advanced by the late Bob Marble or is reflected in 8th Ed. ATA - can present more descriptive data sets they should be incorporated. But the basic assumption remains the same: the cost input should be descriptive of the cost that would be incurred in the situation.

Reply to post by Scott Cullen, on October 10, 1999 at 11:31:13:

I have found the method of computing basic value in The Guide to Appraisal of Trees and Other Plants in Ohio, Fifth Edition, to be enlightening. The Ohio Chapter of the I.S.A. uses a variable rate for increasing cross-sectional area. While retail installed costs are used for trees below the largest commonly replaceable size, the rate per sqare inch decreases for larger size trees. Above a designated size, the addtional area is appraised based on average wholesale, in-ground prices. The reason given in the guide is "Increasing size for larger trees is compensated at the in-ground price since moving them is impractical.". After reading and using the guide, this seems a fair way to assign the basic value, since installation costs are only occured for the size of tree that is used for replacement. The frequency and intensity of maintenance that went into growing the tree after it was planted, much less than when it was in the nursery or when a landscaper planted, mulched, guyed, and gauranteed it. If cost is to be a basis by which tree values are depreciated according to benefits, perhaps this should be considered in Ninth Edition of The Guide for Plant Appraisal. Does anyone know of other capters or regional organizations which have considered this type of basic price structure for the trunk formula.

Reply to post by Scarlata, on October 10, 1999 at 11:31:13:

I think there are three points of interest in your post.

1) The use of a variable rate across size increase. I think this is perfectly appropriate if it more accurately reflects costs incurred. Whether that means costs actually incurred or hypothetically incurred is an additional twist and the following two points may explain that.

2)" 'Increasing size for larger trees is compensated at the in-ground price since moving them is impractical.'. After reading and using the guide, this seems a fair way to assign the basic value, since installation costs are only occured for the size of tree that is used for replacement."

I think the very idea of the trunk formula method is that it extrapolates a replacement cost - including retail markup and installation - for trees "beyond replaceable size." If they were actually or practically replaceable we would use the actual data. Since we don't have those data TFM acts as a surrogate.

If we limit the cost basis to what is actually replaceable are we also saying that there is no increment of value beyond replaceable size? That does not seem fair to a damaged party or generally descriptive of benefits. It seems quite logical that if tree x is replaceable for $x and tree (3)x is beyond replaceable size that the replacement cost for tree (3)x would be something greater than $x and that benefits and value might well be something greater than what is indicated by a cost of $x.

3) "If cost is to be a basis by which tree values are depreciated according to benefits..." The point I was trying to make in this thread is that a complete replacement cost (size for size including tree, markups, transport, installation, profit and overhead and establishment) should provide the initial indication of value in a replacement cost approach and that depreciation to reflect benefits should be separate and explicit. Using a modification of cost as a depreciation method has two problems... a) it may be inconsistent with other applications of the same method causing confusion among appraisal users and b) it may be implict depreciation, that is not fully explained.

There is a basis in theory for using a different cost. The real estate appraisal literature, for example, distinguishes REPRODUCTION and REPLACEMENT. Reproduction being exact duplication in kind and in place and replacement being replacement of equivilent functional benefit. Replacement is generally at a lower cost level and it removes the need for certain classes of explicit depreciation. It is justified when that particular class of deprecition is partcularly difficult or unreliable... or perhaps just a waste of time because it is so clear that exact reproduction would be exccessive. BUT, and it's a big but, the use of replacement cost rather than reproduction cost MUST be explicitly stated, explained and justified. It may not qualify as an entirely separate method but it certainly is a distinguished technique.

If a chapter or regional group endorses a modified technique it goes a long way to solving the inconsistency issue, at least within that chapter or region. But I wonder if it solves the explicit depreciation issue.

For me it comes back to the three pronged test:
a) is the cost descriptive of the cost that would be incurred to replace the damaged property? If the property is not actually replaceable this cost may be somewhat hypothetical but it trends in the direction of a higher value with a larger size. Benefits or value may well have existed beyond those that are replaceable and the idea is to provide an indication of those. b) is depreciation of that cost indication to reflect benefits explicit? c) is the method consistently applied so as to avoid user confusion?

I appreciate your post... it got me digging into the reproduction/replacement distinction a little more.

Reply to post by Scott, on October 27, 1999 at 17:30:10:

Aren't we already using the Reproduction/Replacement concept?

By your definitions: "Reproduction being exact duplication in kind and in place and replacement being replacement of equivilent functional benefit."

We use Replacement Cost for trees as the Reporduction method, and Cost–of–Cure as the Replacement method in RE (I know this is going to get confusing, due to the crossing of the terms). In Cost–of–Cure, we look for alternatvies that may not be exact replacements of the items, but yield comparable benefits, and by inference, comparable value.

Reply to post by Russ Carlson, on October 27, 1999 at 19:50:16:

Good points Russ.

I think TFM essentially is a REPRODUCTION cost model (and yes the terms are a little reversed since we use a Replacement Cost Method for trees of "replaceable" size and TFM for those that are larger as if we could replace them) as presented and generally understood. And deductions from that size for size, in place reproduction cost are accomplished through depreciation ( the S, C & L factors). That's exactly why, IMHO, variations (such as what the Ohio variation seems to do) that use front end reductions in cost in lieu of depreciation may be confusing. It may be a Replacement rather than Reproduction model and that inconsistency may not be apparent to the appraisal user who tries to compare different TFM appraisals. The other issue is that value, as a function of benefits, should be determined by the appraiser in each case. If a method reduces value in blanket fashion rather than by explicit and considered depreciation judgments by the appraiser, it may understate value in some cases. Remember that depreciation is a downward only adjustment from the cost initial cost indication of value. Starting with an optimum cost the apprasier can always depreciate to a reasonable final opinion. Starting with an already reduced initial cost indication, the appraiser has no mechanism to add value back if needed... that is without further distorting the general model.

Cost Of Cure does indeed have the potential to be the proper place to implement replacement as distinguished from reproduction. But I'm not sure CoC is clear on how to handle and explain varying plant sizes. Conceptually, CoC could A) simply be the same as RCM, using size for size cure for replaceable size plants, B) use multiple plants or compounding to cure the loss of a single plant beyond replaceable size or C) use a smaller plant to cure the loss of a larger plant. This alternative C could indeed be characterized as "replacement" of functionally equivilent benefit. The problem is that the Guide is not clear in it's instructions regarding plant size. The appraiser is not instructed to be explicit in explaing whether the particular application is A, B or C. If it is C there is no explicit explanation that the smaller size plant is a replacement rather than a reproduction in lieu of depreciation or that it in fact is depreciation. We discussed this in another thread - I think on factual vs methodological determinations. The application of depreciation should be consistent or at least analogous across methods and it must be explicit.

Using TFM as the reproduction method and CoC as the replacement method (using the strict RE Apprasial meaning of the terms here) might be a very good way to make the distinction. But the guide doesn't give consistent guidance on this.

I think one of the big problems in tree apprasial is that apprasiers X, Y and Z in the absence of specific guidance all tweak the methods to work a particular way... the way that works for them. And they may all come up with similar and valid conclusions. But the outside observer does not see consistent methodology and that's confusing. I thnk where we should be going is toward methods that A) are academically and theorteically supported and consistently applied (leaving lots of room for variable subsidiary techniques as long as they too are named, supported, consistent and explicit) and B) allow maximum use of apprasier judgement in observing, interpreting and applying facts.

What we have in may respects is the reverse of that: A) methods which are subject to endless individual interpretation ("what TFM means to me") and B) data inputs which are standardized or mandated (regional species lists that must be followed or unit costs that must be used or replaceable sizes that must be used.

Reply to post by Scott, on October 28, 1999 at 23:55:36:

I agree, guidelines are often vague. I often deal with properties where a number of plants have been damaged. In many of these cases, trunk formula or replacement with actual size and quantity of plants damaged is not reasonable, using real-estate values as a guideline. Following location depreciation instructions in "The Guide" or the new Guide for Rating Condition and Location published by the Minnesota Society of Arboriculture do not seem to provide sufficient deductions to balance the value of multiple large trees and property value. I have sometimes used additional depreciation for spacing of trees close together, as two trees planted too close together do not usually provide double the benefits. I often find cost of cure is often better suited but guideines are even more vaguel. Perhaps some of these issues will be
addressed in the Ninth Edition of "The Guide".

Reply to post by Scarlata, on October 29, 1999 at 14:48:08:

Minnesota sent me a copy of their revised supplement but I've not had a chance to go through it as it relates to real esate value. The 9th Edition seemed to be headed in the direction of testing all value opinions against real estate value. I have not seen the final draft which has no gone to press.

I presented a "reasonableness test against real estate value" at the ASCA conference in New Orleans in 1995. I'm trained as a real estate appraiser - though I don't practice in that field - so I understand the application pretty well.

The critical point is that a cost indication of value should be depreciated to something approximating the contribution to real estate value IF that is the definition of value in the case. The definition of value which applies is set by the appraisal problem and is usually indicated by the client, the law or the court.

Value does not need to be reasonably related to real estate value if another definition of value applies. A number of cases have been reported in Arboricultural Consultant in which the courts awarded values significantly higher than contribution to real estate value.

What's needed is not guidance about WHAT depreciation should be in one case or another, but WHY and HOW depreciation should be applied meaningfully.

Reply to post by Scarlata, on October 29, 1999 at 14:48:08:

Scarlata, and others out there,
The Minnesota guide for location and condition factors is exactly what it states...Their chapters guide for their region. It is well done, well thought out, and very detailed, but it is not part of or in lieu of CTLA's GUIDE. Other chapters have done similar projects, as encouraged by CTLA.
Very treely,
Lew

Reply to post by lewbloch, on November 09, 1999 at 20:34:58:

Hi Lew, glad to see your input here. As the eminent Lew Bloch always says "the Guide is a guide is a guide." Lew is the same true of the chapter guides or supplements or do any of the chapters characterize their publications as standards that MUST be followed in order to practice properly?

Reply to post by Scott, on November 11, 1999 at 17:56:20:

Hi Scott,
Of course I don't know what went on or goes on in any of the other regions, but the regional guides SHOULD be used only as a guide. There are no rules in plant appraising, only guidlines. It is up to the individual appraiser to decide what path to follow and how to follow it. I know that you know all of this, but thanks for allowing me to get the message out.
very treely,
Lew

Reply to post by lewbloch, on November 12, 1999 at 07:44:32:

Thanks for the quick response Lew. A continuing concern for me is the balance between guidance and standards. On the one hand many practitioners percieve the Guide and it's Chapter Supplements as standards or rules and on the other, IMHO, practitioners need more specific guidance. I've copied part of an earlier post in this thread because I think it's worth repeating.

"I think one of the big problems in tree apprasial is that apprasiers X, Y and Z in the absence of specific guidance all tweak the methods to work a particular way... the way that works for them. And they may all come up with similar and valid conclusions. But the outside observer does not see consistent methodology and that's confusing. I thnk where we should be going is toward methods that A) are academically and theorteically supported and consistently applied (leaving lots of room for variable subsidiary techniques as long as they too are named, supported, consistent and explicit) and B) allow maximum use of apprasier judgement in observing, interpreting and applying facts.

What we have in may respects is the reverse of that: A) methods which are subject to endless individual interpretation ("what TFM means to me") and B) data inputs which are standardized or mandated (regional species lists that must be followed or unit costs that must be used or replaceable sizes that must be used."

I'd like to see some general discussion on this idea. What do you think?

Reply to post by Scott, on November 12, 1999 at 17:34:43:

I know where your coming from, Scott, and see your position, HOWEVER, our field or endeavor of appraising is so different from most others. Each assignment we undertake is so different from our previous one, we have to make our own descisions, based on personal experiences, as well as guidlines from the GUIDE. I think, and hope, that every plant appraisal workshop, stresses the fact of the book being a guide only, not rules. Wouldn't it be great if appraisers of landscaping had to attend at least one workshop before being allowed to appraise? (Bite your tongue, Lew)

You know my thoughts on the subject, Scott, and I really beleive that too many people make the appraisal process more complicated than it should be.

Kepp it up, Scott

lew

Reply to post by lewbloch, on November 14, 1999 at 07:57:36:

You've touched on a number of topics Lew.

Yes it would be great if landscape appraisers had to attend a number of workshops sufficient to prepare them for the complexity of appraisal assignments they undertake.

The idea of the "appraisal process" being too complicated or too simple is an important one. For a great many appraisers who may do an occasional casualty loss or insurance appraisal simple techniques have great merit and serve the public interest well, IF we as a group can be sure that those simplified techniques rest on firm ground. For other appraisers, no doubt the smaller group, who undertake complex cases perhaps involving litigation the techniques may necessarily be more complicated and the necessary understanding to defend and explain them more comprehensive. Where standards, "rules" if you will, are essential is in the underlying appraisal process.... defining the problem, defining value, understanding the purpose and use of the appraisal, understanding WHY the indication of value may be meaningful and what precision or reliability it might have.

The facts may vary in every case. But no more so than in real estate appraisal, or fine arts appraisal, or livestock, or breeding stock. We often here that the BIG difficulty in appraisaing plants is that they are dynamic organisms. A fact but not an obstacle. Plants are no more dynamic that an up and running business and we value them all the time. The stock markets embody millions of such judgements every day. No more dynamic than that prize thoroughbread stud on your Maryland horse farm. The real difficulty is that we're dealing with non-market goods... we don't have the luxury of available data on frequent exchanges. IMHO that increases the need for rigorous standards in defining the problem and collecting data rather than justifying endlessly variable methodological interpretations. Any such standardization needs to be geared to the most difficult and complex cases and perhaps relaxed for the simple or low value ones. Standardizing for the simple ones... the lowest common denominator... leaves an uncharted course for the complex ones. There's no firm basis, no academic structure to defend from. No culture to establish wide acceptance of and competence in the more complex techniques. That is not to say that there should be no variability in application. I think the point is that the more variable the applications may be the more necessary underlying standards are.

Scott

Reply to post by Scott, on November 15, 1999 at 18:27:41:

AND you bring up interesting points, as well. I can see standards, as you started to define them, in assessing the assignment, etc. as to the mechanics of the actual appraisal, I think guidelines are perfectly appropriate. I did not even think of the "tree dynamics" in my reference to trees being difficult to appraise. The differences are in the fact that we are often giving a price to replace the irreplaceable. Also, all 30" Red oaks (for example) are not equal because of condition, location and such. One has to acquire some expertise to make these judgements, but it is quite often common sense rather than following rules or regulations. I think we aree on MOST of these concepts, Scott
lew

Reply to post by lewbloch, on November 16, 1999 at 06:52:48:

We certainly agree that the most difficult aspect is that we are valuing the irreplaceable... pretty much the same, as I suggested, that these are non-market goods. If they were replaceable, we'd just go see what the last one was replaced for. All the more reason we need a common understanding and resonably standardized methological procedures.

The variabilities you mention are difficult to deal with but they are the same factors that real estate appraisers, for example, depreciate for: condition and location. They have particular names for them... physical deterioration, economic obsolesence and so forth but they reflect the same realities. The similarities are addressed in detail in the TFM article Russ has linked here.

What I've observed is that virtually all the questions that tree appraisers find difficult can very logically and reasonably be posed when grounded in a good methodological context... the one I'm most familair with is real estate appraisal but similar grounding might be found in natural resource economics or other specialties.

Where we might have somewhat different understandings is in the openness of current guidelines. I'm not sure they provide a grounded enough context. The mediocre appraiser doesn't even know the difference and just robotically follows the guidelines. The good and conscientious appraisers are left the figure out their own rationales. Very often they come up with reasonably supportable results, but they may not have much to support them beyond their own intuitive sense. And how they get there my seem radically different from someone else's methodogy. That makes it pretty confusing for the appraisal user.

Reply to post by Scott, on November 16, 1999 at 17:58:43:

We do agree on most of the appraisal puzzle, Scott. The example you give about a MEDIOCRE appraiser would be true about any endeavor. I am striving to reach mediocrity.
verylew

Reply to post by lewbloch, on November 16, 1999 at 18:34:44:

Lew you've always been burdened with an overly scrupulous conscience. Maybe your "mediocrity" is really puts you in the 99% percentile! Seriously, we all need to keep pushing the envelope and expanding both our personal skills and the state of common knowledge.

Scott

Reply to post by Scott, on November 17, 1999 at 17:54:06:

Touche, Scotty..............