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Cost Approach - Reproduction or Replacement

Discussion in 'Urgent - Help Needed' started by Timothy Fierek, Mar 13, 2006.

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  1. Timothy Fierek

    Timothy Fierek Sophomore Member

    0
    Apr 24, 2002
    Professional Status:
    Licensed Appraiser
    State:
    Wisconsin
    When the cost approach is required, I run the Marshall and Swift Residential Cost Estimator.
    Nearly everyone that I do I use Replacement Cost New.
    Am currently working on a review for which the cost approach was completed Reproduction Cost New.
    The appraiser does not seem to have any comprehension of the cost approach at all, with what appears to be made up cost figures.
    Shouldn't the Reproduction only be used for unique or older properties for which the current building equivalent is not similar?
    Thanks for any feedback.
     
  2. Robert Dunkle

    Robert Dunkle Senior Member

    0
    Jan 17, 2002
    Professional Status:
    Certified General Appraiser
    State:
    Oklahoma
    The reproduction cost can be used on any age property that you can reproduce. I NEVER use reproduction cost because that indicates that you have analyzed every facet of the building and have figured cost to exactly reproduce that building. My market and clients are more interested in replacement cost.

    I would agree that the original appraiser probably didn't know how to do a Cost Approach, or, they could have just hit the wrong box.
     
  3. bart nathan

    bart nathan Member

    5
    Jun 9, 2005
    Professional Status:
    Certified Residential Appraiser
    State:
    California
    I usually mark the reproduction box. I use the replacement cost figures but my software automatically plugs in the depreciation figure taken from the effective age of the house (WINTOTAL). Maybe I should start to check replacement cost and delete the depreciation figure? If you use the replacement approach there should be no depreciation figure taken out correct?
     
  4. Timothy Fierek

    Timothy Fierek Sophomore Member

    0
    Apr 24, 2002
    Professional Status:
    Licensed Appraiser
    State:
    Wisconsin
    Depreciation either way should be calculated, whether or not it is reproduction or replacement.
    Look in Marshall and Swift at their depreciation tables.
    I would not rely on the WinTotal program. Most of what I see is numbers pulled from air and plugged into Wintotal. Most appraisers seem to back into the cost approach in order to support their market approach.
     
  5. xm72mhd

    xm72mhd Elite Member

    0
    Aug 13, 2005
    Professional Status:
    General Public
    State:
    Florida
    For those of you who do reproduction cost approaches. I have been looking for a reliable source of reproduction cost figures and can't find one. Actually there isn't much demand for it, but I'm considering moving into a niche in historical homes and I have no ability to calculate what it would cost to reproduce a 1900 Victorian 3 story mansion.
     
  6. Brad Ellis

    Brad Ellis Senior Member

    0
    Feb 7, 2006
    Professional Status:
    Certified Residential Appraiser
    State:
    California
    Edd,

    Appraising historical homes is a great niche- been in that for years and teach it.

    However, there will not really be a need for reproduction cost. In the first place, if the nature of the historical stature of the home relates to the improvements, the cost approach is not relevant since you could not reproduce the home with all the historical content. What I mean here is that, if the historical component is due to design by a famous dead architect, or because G. Washington slept there, etc. such content cannot be reproduced.

    So, if that home were destroyed it could not be reproduced at all.

    And, remember, this is coming from a cost approach believer! It is one of those times when I do not use it.

    If the historical nature of the home is due to its location, such as being the gateway to an original toll road (we had them before cars), then the improvements themselves are far less important and replacement cost could be used, if you like.

    That said, IF you find a way to get the reproduction costs that are at all reliabel, please do let me know. I'd love that data. At the same time, when I think about all the stuff that has been forgotten, it does bother me a bit.

    When we renovated the Statue of Liberty, the flame had to have a new cost of gold leaf. There was only one old guy who knew how to do that, and part of his contract was to train two more guys in the art. If the original guy still lives there are now 3 on the planet!

    Good luck, have fun, and go forth and do good.

    Brad
     
  7. Otis Key

    Otis Key Elite Member

    0
    May 15, 2004
    Professional Status:
    Certified Residential Appraiser
    State:
    New Mexico
    If you lock the REL space with nothing showing there then you can override the depreciation calculations and input them manually.
     
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