October 2, 2023
Trump’s Real Estate Valuations: They Mean Just What He Chooses
‘The question is,’ said Alice, ‘whether you can make words mean so many different things.’ ‘The question is,’ said Humpty Dumpty, ‘which is to be master — that’s all.’
The Daily Beast quoted me in Trump’s Bank Fraud Defense ‘Defies the Laws of Physics.’ It reads, in part,
Donald Trump’s colossal trial for faking property values starts next Monday, and one mind-boggling issue has emerged as his weakest defense yet: the idea that his past lies on financial statements were justified because prices eventually went up anyway.
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“What he is saying is completely inconsistent with how real estate professionals talk about valuations,” said David Reiss, a Brooklyn Law School professor who specializes in real estate finance.
“When you talk about valuations at a given time, you’re talking about what its value is at that time. It becomes more valuable in the future, but that’s its value at the time,” Reiss said.
That means Trump’s 2014 financial statement should have, naturally, captured the value of any given building or land at that time.
To better understand why Trump’s excuse is bonkers requires a quick review of the three basic methods to assess value employed by professional property appraisers.
One is the income approach: What income a particular property is currently generating? That doesn’t account for the future, Reiss said.
Another is the cost approach: How much does it cost to replace the property? That doesn’t consider the future either, Reiss made clear.
The third is the sales comparison approach: What are similar parcels and comparable properties selling for? This could include future expectation of development, Reiss explained. After all, sale prices are determined by supply and demand—and a fundamental concept in economics dictates that demand can be affected by consumer expectations of future price changes.
As usual, Trump’s logic seems to careen off the rails and focus solely on his property’s future value. But Trump simply can’t do that because he wants to.
“That’s not how the legal system works or how the real estate industry works… if everybody could say that, nobody could be accused of a lie. We would all do whatever the heck we want,” Reiss said.
Reiss likened Trump redefining time-bound questions on financial forms to the way Humpty Dumpty makes up words in Lewis Carroll’s sequel to Alice’s Adventures in Wonderland. The law professor read a passage in which Alice took issue with the Eggman’s improper use of the word “glory.”
Humpty Dumpty smiled contemptuously. “Of course you don’t—till I tell you. I meant ‘there’s a nice knock-down argument for you!’”
“But ‘glory’ doesn’t mean ‘a nice knock-down argument,’” Alice objected.
“When I use a word,” Humpty Dumpty said in rather a scornful tone, “it means just what I choose it to mean—neither more nor less.”
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