CNN ran a story this weekend attacking U.S. Catholic church leaders for lavish living in valuable homes, and hired a private appraisal firm to make its point. In the story, CNN said that New York City’s archbishop lives in a building valued at $30 million. I Tweeted at the reporter questioning the technique, since appraisals are often not much better than guesstimates. The exchange ultimately ended with him deleting one of his Tweets at me, but I hope we all learned something about the difference between appraised valued (theoretical) and prices (when real money is at stake). Here’s what happened.
Paying for an appraisal on a home or a luxury item is certainly an interesting way to guess at the possible value of something, but it’s quite far from getting a real offer to buy, which is the only way to know the real price of something, as anyone who’s ever sold a home knows. We all learned this the hard way during the housing meltdown, when it became abundantly clear that appraisers have a bad habit of simply determining value at whatever the entity paying them wants.
When I pointed out that appraised values are theoretical to the CNN reporter on Twitter last night, he defined appraisals:
“They are the opposite of theoretical. are based on real data: comp sales, square footage … that’s why they are reliable.”
I told him homeowners trying to sell or fight their taxes would disagree. He replied.
“Just because you don’t like appraisals doesn’t mean they are inaccurate.” That Tweet appears to have been removed now, though still accessible on Topsy.com as of mid-day.
I then asked him to provide comparables to justify the valuations. He didn’t respond. I then sent him a link to a New York Times story on a study showing how notoriously inaccurate appraisal values are, adding “That’s what the data says…what I dislike is data abuse.”
After that, the Tweet about me disliking appraisals became inaccessible.
If you read the CNN story, you’ll see it intermingles examples of prices paid for expensive construction, which are perfectly good examples of lavish living, with appraised values of old buildings — in the case of the NYC residence, the church has owned and used that property for nearly 200 years. I couldn’t find a record of what the church paid for it in the early 19th Century, but I’m sure the property has appreciated 100,000 percent or more since then.
More important, the CNN story notes, later on, that the New York bishop’s residence is listed on the National Register of Historic Places, so it’s anything but a disposable asset that can be sold easily or converted. Also, it’s not for sale and no one can imagine the church ever selling it. In other words, saying it is worth $30 million is a pretty meaningless determination. Theoretical, at best.
The CNN story was framed to suggest that the American bishops are not following the lead of Pope Francis and living as humbly as they should. That’s a perfectly good argument. The archdiocese of New York is currently trying to raise $175 million to refurbish St. Patrick’s Cathedral, for example, which is hard for any thinking person to swallow as Christian. Worse yet, there have been rumblings that the pope needs to tune down his message against unbridled capitalism, lest fund-raising efforts among New York’s rich be damaged — that’s abominable.
But trusting appraisals has gotten plenty of folks in trouble through the years. As a rather extreme example of how theoretical third-party valuations can be — it’s not a building appraisal, but it demonstrates the point — Forbes said recently the L.A. Clippers basketball team was valued at $575 million, even *after* Steve Ballmer agreed to pay $2 billion for the franchise. Good valuations are hard to come by.