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  #1  
Old 09-22-2011, 09:16 AM
Luke Garcia Luke Garcia is offline
 
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Default Cost Townhouse

Got a attached subject, middle unit of three. Not a condo just a PUD. Does anyone have a good statement that I can use explaining why the cost approach is not practical with common walls.
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Old 09-22-2011, 09:24 AM
TJSum TJSum is offline
 
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Quote:
Originally Posted by Luke Garcia View Post
Got a attached subject, middle unit of three. Not a condo just a PUD. Does anyone have a good statement that I can use explaining why the cost approach is not practical with common walls.

Why would anyone have a "good comment" stating that? M/S does supply cost figures for townhome construction, as well as other sources of cost figures. The only hard part would be determining true land value for a townhome, not the actual cost of the improvements.
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Old 09-22-2011, 09:35 AM
leelansford leelansford is offline
 
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Originally Posted by Luke Garcia View Post
Got a attached subject, middle unit of three. Not a condo just a PUD. Does anyone have a good statement that I can use explaining why the cost approach is not practical with common walls.

Which service provider to you use for costing?

There is probably another reason (or two) why I might not develop the CA for such an attached dwelling, but, one reason would not be due to "not practical with common walls".
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  #4  
Old 09-22-2011, 10:28 AM
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Christine Marie Christine Marie is offline
 
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Originally Posted by Luke Garcia View Post
Got a attached subject, middle unit of three. Not a condo just a PUD. Does anyone have a good statement that I can use explaining why the cost approach is not practical with common walls.

hmmm, how about subject property cannot be rebuilt without building the other two units as well?
  #5  
Old 09-22-2011, 10:36 AM
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residentialguy residentialguy is offline
 
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Quote:
Originally Posted by Luke Garcia View Post
Got a attached subject, middle unit of three. Not a condo just a PUD. Does anyone have a good statement that I can use explaining why the cost approach is not practical with common walls.
Here you go:

"There is a lack of land sales available for reliable indicators of value. Since townhomes are integral parts of the total project, which are connected and share the same roof with one or more other units, the cost approach is impractical for estimating the value of any given unit; therefore, the appraiser did not include the cost approach when appraising due to the unreliability of the results and impracticality of estimating the cost approach, nor is it required by Fanie Mae or Freddie Mac"


You can throw in Age on top of that, if it isn't very new.
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Last edited by residentialguy : 09-22-2011 at 10:50 PM.
  #6  
Old 09-22-2011, 02:55 PM
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Terrel L. Shields Terrel L. Shields is online now
 
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Quote:
how about subject property cannot be rebuilt without building the other two units as well?
I donno. The unit next to my assistant burned out and was rebuilt without disturbing her unit.. She had some smoke damage which insurance paid for.

And land value can be extracted. There is no reason that the cost approach can't be applied but whether it be necessarily is another issue.

Quote:
The Cost approach is applicable but not necessary to arrive at a reasonable value. The Sales approach is the dominate way such properties are valued and therefore, is the most reliable method of valuation.
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  #7  
Old 09-22-2011, 03:01 PM
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CANative CANative is online now
 
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There is no reason that the cost approach can't be applied
The cost approach is the only approach that can be applied to all improved real property and personal property.
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  #8  
Old 09-22-2011, 10:14 PM
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David Wimpelberg David Wimpelberg is offline
 
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The simple answer is that buyers do not buy attached townhouses on the basis of cost. When was the last time you heard a buyer say "That townhouse is too expensive...I'll go built my an individual unit instead"? The Cost Approach for an individual townhouse is simply a mathematical approximation to approach value; it has nothing to do with market transactions.

The Cost Approach could be developed, but it is rather complicated, because it involves determining the pro rata share of common area improvements. The appropriate fee for such an assignment is enough to scare most clients away.

If a lender "requires" the Cost Approach in such an assignment, it is likely that they are really looking for the insurable value on the unit.
  #9  
Old 09-22-2011, 10:16 PM
jallen5521 jallen5521 is offline
 
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"The cost approach is not a good indicator of value in row townhomes. The builder builds one unit (4 homes) at once and the cost breakdown for each individual unit is not easy to abstract. Builders buy their materials in bulk when building attached homes."
  #10  
Old 09-22-2011, 10:19 PM
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PropertyEconomics PropertyEconomics is online now
 
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Originally Posted by CANative View Post
The cost approach is the only approach that can be applied to all improved real property and personal property.


WHAT?????

Personal property has no "market value" which can be determined by analysis of sales of similar personal property ..... seriously?
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