Select the Out-of-Town Appraiser:
New Social Science Research on Real Estate Expert Witness Selection
AMERICAN BAR ASSOCIATION, AUGUST 2014 LITIGATION CONFERENCE
Grant W. Austin, M.S., MAI, CMRS, MRICS
American Valuation, Inc., and
University of British Columbia, Sauder School of Business
This paper adds to the literature on the selection of the real property appraisal expert witness. expertgaragedoorrepairllc The existing appraisal expert witness selection literature indicates that when the out-of-town expert witness overshadows the knowledge and experience of the local expert, the out-of-town expert is the clear choice yet most lawyers base their appraiser selection on factors that are irrelevant to winning the case such as convenience, proximity to their office, proximity to the subject property, a client’s recommendation or the expert’s cost. The results of this two-part social science research study indicate that in situations where there will be contentious valuation issues or, where the appraisal expert witness will be called upon to criticize the work of the opposing appraiser, it may be in the best interest of the client and outcome of the case to select an appraisal expert who is located outside of the appraisal services area of the opposing appraiser.
Preface to the Paper
After nearly 25 years as a real property valuation expert witness, this author has observed that, in the majority of real estate litigation cases, lawyers typically select their appraisal expert from within the general vicinity of the subject property. However, this practice is contrary to the literature on the expert witness selection process that does not address the location or geographic proximity of the expert to the subject property as a relevant issue (e.g., Couture and Hayes, 2010; Fried, 2008; Tirella, 2006; Strutlin, 1996; Cabaniss, 1997; Bremser and Mathis, 1994; Harrell, 1993; Champagne et al., 1991; Jones, 1955).
This paper explores the reasons why many lawyers select a “local” appraiser and details compelling new research suggesting that, at least for important or high value cases, lawyers should look to the best appraisal expert witness from beyond the general geographic area of the subject property and the opposing valuation expert.
Common Rational for Hiring the “Local” Appraiser
A review of the appraisal expert witness selection literature indicates a limited number of instances from the secondary literature (e.g., non-peer-reviewed or magazine quality) where the hiring of a “local” appraiser is suggested. The reasons for selecting the local appraisal expert witness include:
• Cost savings;
• Convenience and ease of meeting/communication;
• Client feels comfortable with and/or has previously hired their local expert;
• Knowledge of microeconomic conditions, and past trends in the area as a basis for opinions about future market conditions; and
• Where a jury will be influenced by where the expert resides, grew up or went to school.
A commonly stated disadvantage of an out-of-town expert is the added expense of travel. However, “the cost can be worth it… when the faraway witness completely overshadows opposing counsel’s local expert” (p. 567).
Another disadvantage, when the out-of-town expert is also a more prominent expert with better credentials, are higher fees. The attorney must consider this practical consideration in the context of what fees the client can reasonably bear, how long the action is likely to run and the expected use of the witness.,
In instances where the local appraiser/expert is a client’s recommendation, the attorney must assess whether the client’s advice is based on a desire to throw a friend some business and/or wants to hire the expert (irrespective of qualifications) most likely to favor the interests of the client because of personal or economic ties. Haig’s (2011) advice to counsel on going along with the client-selected expert is:
“Remember, it is the attorney to whom the client will likely give credit or blame for the result of the litigation. As repeatedly noted, the expert often plays a significant-if not the key-role in the litigation process. Accordingly, there are no substitutes for an attorney performing his own due diligence regarding a proposed expert and for an attorney engaging in clear communications with the client regarding the pros and cons of any proposed expert” (p. 563).
Although not explicitly stated in the literature on the cost savings of a local expert, the out-of-town appraisal expert may need additional time and associated costs to comply with the Competency Rule of the Uniform Standards of Professional Appraisal Practice (USPAP) (2014-2015), specifically:
(a) compliance with laws and regulations that apply to the appraiser such as the State’s appraisal licensing law; and
(b) “where geographic competency is necessary, an appraiser who is not familiar with the relevant market characteristics must acquire an understanding necessary to produce credible assignment results for the specific property type and market involved” (p. U-11).
Referring in this section exclusively to USPAP’s geographic competency, the Federal Rule of Evidence 702 requires that “scientific, technical or other specialized knowledge will assist the trier of fact,” and in that situation, (b) “a witness qualified as an expert by knowledge, skill, experience, or education, may testify thereto in the form of an opinion or otherwise… ” Rule 702 was amended in 2000 with the addition of a “reliability” element. Under Rule 702 as amended, a qualified witness may only provide expert testimony “if (1) the testimony is based upon sufficient facts or data, (2) the testimony is the product of reliable principles and methods, and (3) the witness has applied the principles and methods reliably to the facts of the case.” Therefore, for the appraiser expert, the issue of geographic competence as it relates to Rule 702 has three components: whether the appraiser competently considered the relevant market characteristics, whether the expert testimony is “based upon sufficient facts or data,” and whether the expert has “applied the principles and methods [she used] reliably to the facts of the case.”
Whether the appraisal expert satisfied the elements of geographic competence will be decided as a precondition for admissibility. However, in most cases the issues will go with the weight of the evidence instead of admissibility.
Acquiring geographic competency will not be an issue for the more experienced/prominent out-of-town expert who will be accomplished in understanding the market characteristics relevant to the valuation issues.
The most comprehensive literature on appraisal expert witness selection does not recommend the selection of an expert witness to be geographically proximate to the subject property. However, the typical attorney favors the “local” appraisal expert with the rationale being one or more of cost minimization, attorney convenience, client preference and previous knowledge of the subject’s neighborhood or market.
There will be times when cost necessitates the hiring of a local appraisal expert. Additionally, there will be cases where an appraisal expert is required but, since valuation is not the disputed issue, any additional cost for a non-local or better qualified expert is not justified.
However, it is not in the best interest of the case for an attorney to base his or her expert selection solely on:
• Attorney convenience;
• Expert cost;
• Appraiser’s previous market knowledge; or
• Client’s recommendation.
Background and Objective of this Research Study
Constraints on the funds available for expert witness costs will typically result in hiring the local appraisal expert. But absent this limitation, should the attorney favor the local appraisal expert or expand his/her search for an expert outside of the local area or even beyond the State?
The existing appraisal expert witness selection literature indicates that when the out-of-town expert witness overshadows the knowledge and experience of opposing counsel’s local expert, the out-of-town expert is the clear choice.
In the absence of this “clear choice,” this researcher questioned whether the local appraisal expert, by virtue of being “local,” is predisposed to going “soft” or holding back on a rigorous critique of the work (e.g., data selection, analysis, conclusions, standard of care, USPAP Standards violations, alleged unethical practices) of the opposing “local” expert. To go “soft” on a justifiable attack on the work and credibility of such an opposing witness would be inconsistent with the ethical standards of the real property valuation profession and a disservice to the retaining attorney and his client.
Therefore, in the attorney’s appraisal expert witness selection process, the attorney must do all that he/she can to select the most knowledgeable, credible, articulate, etc. appraiser, including one who will be uncompromisingly thorough in assisting in the destruction of the opposing expert’s credibility.
This research study is composed of two (2) separate, yet interrelated, research studies, as follows:
1. It is hypothesized, based upon previous social science research (e.g., Scheier and Carver, 1985; Wiekens and Stapel, 2010), that appraisal expert witnesses are higher public self-aware persons than appraisers who do not work as expert witnesses in litigation settings. A highly public self-aware person is associated with the relatively social standard to get along with others, to be accepted, not to be different, and to try to create a favorable public image; and
2. Then, if it is found that appraisal expert witnesses are significantly higher in public self-awareness than non-litigation appraisers, the next research question is whether this high public self-aware expert appraiser will be equally critical of opposing expert witness appraisers who are within his/her sphere of professional influence (e.g., member of the same Appraisal Institute Chapter) as an opposing appraiser who is from a geographically distant area.
The relevant issue for the expert witness selection process is whether an expert witness appraiser who has a desire to “be accepted and create a favorable image” will perform less than the most rigorous critique on the work of the opposing expert.
The objective of the combined studies is to provide attorneys with additional insight into the location/geography of the expert as an empirically relevant component of the expert witness selection criteria.
Research Study Part A
Overview of Research and Hypothesis
What happens when an appraiser expert witness becomes self-aware? Wiekens and Stapel (2010) indicate that “when people are aware of private aspects, more individualistic standards (e.g., to be authentic and to be different from others) are salient, whereas when they are aware of public self-aspects, more social standards (e.g., to get along well with others, to present ourselves in a positive way, to be admired, and not to be different from others) are salient” (p. 17). This same research indicates that when people imagine that they are in a public forum (such as a presentation, deposition, or trial), public self-awareness (but not private self-awareness) increases.
The hypothesis for this first study is that appraiser expert witnesses who work in a litigation setting (e.g., deposition, video-taped, trial before a judge and jury) will score higher in public self-consciousness than appraisers who do not work in litigation settings.