Reconciliation of Approaches

[Don Clark]

I always agree with Wiley. But only because he makes sense.

That's why I most often disagree with you, you don't make sense.

 

[goumcanes]

Good point, although, are those grocery store books reliable in that they only show the asking price, not the final rented price?

True enough. I approach this in a similar fashion just like I did when I used to do SEC reporting for those horrible public co's I worked for. You NEVER simply made an adjustment based on "management told me to". You had to have something backing it up. Start there, call realtors and ask about the discount to actual rents vs. asking price. You will absolutely see a convergence of prices and voila.

Its always better to have A SOURCE...good/bad/indifferent...at least its a SOURCE. "So Mr. Market professional appraiser, you say in your report that there is no reliable rental data in this market? Lets take a survey of this court room, how many people are renting currently? (half the hands go up and their heads turn at you like, "WTF? this guy cant determine rent rates for this crappy 2 bed / 2 bath condo?"

This way the litigator moves away from the obvious, "AH HA! He had NOTHING...SEE..FRAUD..Incompetence...etc" and is then forced to move into the gray realm of "my source is better than your source". That is a loser every time.

Honestly, how many appraisers do you know that insert "Marshall Swift Cost estimator" and they have never, ever even looked at it, never mind actually paid for it?. Just a matter of time for so many certs now.

Oh..and I have a good friend working the litigation support side for the appraisers that get hauled into the state.

Lets put it this way. They AINT getting hauled in for cost approach or lack of rental data or even MLS photos. They are getting nailed for the biggies: trainees signing certs names, trainees not even registered on cert number performing entire report, making up sales entirely, etc etc. And all the OTHER STUFF they failed to do is added on.

 

[CANative]

That's why I most often disagree with you, you don't make sense.

You're just mad because I made an "old" joke. Which was really a compliment but you took it the wrong way.

I don't think "relevant" and "applicable" have the same meaning. And this is why I keep pushing the retired departure rule. The only difference between departure and sow is that now we don't have to get the clients permission to exclude an applicable approach.

 

[DTB]

I use a very similar statement with one exception. I never say there is a lack of recent rental data as any good litigator could rip that statement apart by simply bringing in one of those rental books available at every grocery store, gym, etc....

I just state that as the scope of work did not indicate the subject property to be utilized for rental income purposes and this method does apply.

One additional tweak, I include "there is a lack of recent similar rental unit sales..."

 

[Laughing Heir]

... What if the appraiser writes in the style of Faulkner?

It seems they'd prefer appraisers report their final reconciliation a la Hemingway.

 

[Kathleen Hayes]

Any help form other NH appraisers or our friends from MA with experiences with the current board?

Kathleen

 

[Don Clark]

You're just mad because I made an "old" joke. Which was really a compliment but you took it the wrong way.

I don't think "relevant" and "applicable" have the same meaning. And this is why I keep pushing the retired departure rule. The only difference between departure and sow is that now we don't have to get the clients permission to exclude an applicable approach.

Actually CAN I was a little to harsh in my statement. And, I am not mad at the "old" joke. When I look in the mirror every morning I do not recognize the old guy looking back.

I was in a grocery store one day and the cashier asked to see my drivers license. I told her OK but there is something wrong with it. I said they had put some old guys photo on it instead of mine. She looked at it, looked at me, looked perplexed, and started to call the manager. I then told her it was a joke. The other customers were practically rolling in the aisles by then. And, she was not blond.

It would probably be better if I, like Danny Wiley would quote USPAP chapter and verse when defending a position but hey, I believe each poster should do that for themselves. Keep posting.

 

[Don Clark]

Any help form other NH appraisers or our friends from MA with experiences with the current board?

Kathleen

Kathleen,

Send the NH Board a link to the forum.

 

[Terrel L. Shields]

Consider my neighborhood where the typical rent is $1,500/month which would not even cover a typical mortgage

debt service is not a requirement for the income approach to "work"...

The income approach works when the ratio between the rents and the value of the property is consistent. Many farm properties will not 'service' the interest let alone the debt, but until the economic "Great Unpleasantness" for many years, holding land over a reasonable time period resulted in returns that generally exceeded any Money Market or CD you could buy. The reversionary value is key to an investment's true "value" as an income property. And when you saw people driving up the price of land in far out places as if it were immediately available for development into tract lots, you knew the end was near - ignore that reversionary value and you never saw it coming.....Land prices changing 40% per year cannot be sustained for many years. Land prices easily appreciated from 4 - 8% annually in our area for 2 decades or more. But in the final months of this insane boom, prices were doubling every 6 months and the banks were lending like mad "before no one could afford land"....

"there is a lack of recent similar rental unit sales..."

and as I would claim, that is often untrue on the face of it.

I never say there is a lack of recent rental data as any good litigator could rip that statement apart

exactly

 

[DTB]

and as I would claim, that is often untrue on the face of it.
exactly

Prove it. Provide any stats you have that support either a unit was rented at the time of sale and remained a rental through at least 1 more lease renewal or provide the stats of sales that were either owner occupied or vacant at the time of sale and were rented for at least 2 years and I'll believe it.

Those stats will not even address their similarity or variance to the subject.

Don't give me the backed into Brad Ellis numbers of some "construed" GRM. i.e. market value is $100,000 and annual income for similar houses is $12,000 so they sell for 100GRM, when none of the sales were for rental, therefore we do not have an investment value (income approach) any which way it gets massaged.