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  #1  
Old 06-02-2005, 12:11 PM
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Don Clark Don Clark is offline
 
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B) For educational purposes only, not to denegrate my fellow instructors at all:

This AM I had a conversation with a local appraiser and he told me about attending a 7 hour USPAP update with a large national CE provider. The instructor told him that when you ascertain that an approach to value is not applicable or necessary, and you are doing a COMPLETE appraisal, that you should develop that approach and keep in your work file WRONG. Page 36, 2005 FAQ's # 63. Also, Ethics Rule, Record Keeping Section.....the content of a workfile for a limited appraisal need only reflect consideration of the USPAP requirements from which there have been no departure and that are required by the specific LimitedAppraisal Assignment.

Now, that is not the best example BUT, if you do not put an approach to value in a report, you do not need to develop it and put it in a workfile.
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Old 06-02-2005, 09:13 PM
Alan Gertner Alan Gertner is offline
 
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Thanks for the commentary.

Please provide your opinion on this related (or possibly identical) topic.

If you are performing a complete appraisal with all three approaches to value, what do you do when there is insufficient data to calculate the income approach to value? I encounter this problem in new and upper scale subdivisions where there are few if any rentals. To make this determination, you need to first research the topic and analyze the data. The income approach to value I calculate is "Unable to determine the income approach to value due to lack of data". I consider this a valid opinion of value and the report is a complete report. I keep the supporting data in my workfile so I can justify my opinion if the need should arise. I also include the "unable to calculate value" comment on the appraisal form where the income approach to value is requested.

In summary, the answer some of the time is "I don't know and don't have the data to calculate an answer". To get to this point, you still need to perform an analysis.

muchas gracias por su opinion.
  #3  
Old 06-03-2005, 03:40 AM
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I've never taken a CE class where the instructor DIDN'T say something off the wall.

Quote:
If you are performing a complete appraisal with all three approaches to value, what do you do when there is insufficient data to calculate the income approach to value?
I say the approach is not applicable and state that fact. How about a home that is 50 years old? Is the cost approach applicable? I am sick of seeing reports with misleading cost approaches. If the cost approach doesn't support the market, it doesn't mean to add a few more dollars to the Sq Ft, increase the land value, and lower the effective age.

You can do a complete appraisal without the income or cost approach -- *IF* they are not applicable.
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Old 06-03-2005, 04:59 AM
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Don,
Frankly, I have been told the same thing during a USPAP class, locally. The specific instance involved in the scenario was that particular to developing a cost approach for a 2055 and only keeping the results in the work file.
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Old 06-03-2005, 05:26 AM
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Quote:
Originally posted by Keith@Jun 3 2005, 03:40 AM
I've never taken a CE class where the instructor DIDN'T say something off the wall.



I say the approach is not applicable and state that fact. How about a home that is 50 years old? Is the cost approach applicable? I am sick of seeing reports with misleading cost approaches. If the cost approach doesn't support the market, it doesn't mean to add a few more dollars to the Sq Ft, increase the land value, and lower the effective age.

You can do a complete appraisal without the income or cost approach -- *IF* they are not applicable.
I agree that an appraisal can be easily developed when the cost approach really does not apply.

Unfortunately, in dealing with secondary market lending... many clients will not let you get away with, "It doesn't apply" if the house is less than 100 years of age. In that case, we develop it as best as possible with a disclaimer statement to the effect of: "On houses older than 10 years, the cost approach is deemed less reliable and is given only minimal consideration in the final estimation of market value. The cost approach was developed at the request of the lender."

Never had any trouble with that disclaimer except from a very poorly trained minimum wage reviewer who did not have such a statement approved on his checklist (he told me that).
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Old 06-03-2005, 06:56 AM
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B) Read the departure rule. If an approach to value is not applicable or necessary then there is no departure, the approach is not done, and obviously if it is neither applicable or necessary then how could you do one and keep it in a workfile? If the approach is applicable, but not necessary, then you invoke departure and you complete a limited appraisal. If an approach is necessary then you must do that approach, and no departure is permitted. In the case where there is insufficient data, state that, and state that you have not done that approach for that reason. You might also add that your peers would do similar or the same. But, if you are not going to put one or more approaches to value in the report then there is no need to keep them in a work file. Noweher in USPAP does it say that.

Q & A #62, page 36, 2005 Q & A's

also, Q & A's 63 & 64, page 36, 2005 Q & A's

These can be researched at:

TAF

Title of the 3 relevant Q & A's are:

Workfile requirements when omiting an approach to value

Workfile requirements when omiting the cost approach

Describing an appraisal as limited when there is no departure

Remember, if an approach is not applicable to an assignment, and it is not necessary to the assignment, then you do not invoke departure. So, even tho your report contain say only 1 approach to value, it is still a complete appraisal.

BTW, this should all be resolved around this time next year when Departure is due to be put out of it's misery. I hope the ASB does not renege on their plans to do that. Then we can be confused by something else :lol:
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  #7  
Old 06-03-2005, 11:21 AM
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Quote:
Remember, if an approach is not applicable to an assignment, and it is not necessary to the assignment, then you do not invoke departure. So, even tho your report contain say only 1 approach to value, it is still a complete appraisal.
Now and then it might be a close call as to whether an approach might be construed by someone else as applicable and necessary. Witness the wide range of views regarding applicability of the Cost Approach.

In my opinion, the prudent paper waster, might want to include evidence in the file adequate to at least remind the appraiser how he/she came to the conclusion the particular approach was not applicable/necessary, with regards to complete appraisals.

Hi Don. I proofed my post to make sure I didn't contradict you :rofl:

Do you think there will be a 2+ year lag time before the old vocabulary dies? Departure, complete, limited, etc? I can see fragments of the past living on for years in addendum's and guidelines until they are clean flushed from memory.
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  #8  
Old 06-03-2005, 11:32 AM
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Don ... I wasn't arguing ... just supporting your original post ....
  #9  
Old 06-03-2005, 11:49 AM
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B) Roger,

For the "prudent"(i.e., a@$l retentive personality) I would not argue with keeping whatever they want in file. The fact that USPAP says it is not required does not diminish the appraisers right to keep whatever they wish in their workfile. In that regard, you make an excellent point.

Doug,

I never thought you were contradicting me. But, even if you had, many things as Roger has noted, may be prudent although not required.

Roger, if in fact Departure is eliminated so will the identificatio of the 2 types of appraisal and 3 types of reports. They will suffer an immediate demise. Now, how long will it take to get that message out to every appraiser? Probably at least 2 years when they have to take the 7 Hour USPAP update again. This forum as well as other forums can help in that regard but, I remember when this 2 types of appraisals and 3 types of reports started. After 3 years I was still explaining it. But, with the new 7 hour USPAP update every 2 years we may be able to shorten that time frame.

Appreciate everyones comments.
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  #10  
Old 06-04-2005, 08:12 AM
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Quote:
I've never taken a CE class where the instructor DIDN'T say something off the wall.
you know, i was tinkin' ze same tang.

Frankly, some people give the for-profit schools fits, but the best 2 USPAP courses I have taken was with Columbia Institute of San Antonio - Geo. Harrison taught one and the other was taught by a guy named Boarnet. They were especially sound and my spin on USPAP dovetailed very nicely with their teaching.

i will certainly be glad to see departure go by the wayside, but wonder what pains are going to be in "Scope of Work" as wags begin to dissect and disseminate that little jewel amongst us gentiles.
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