Reconciliation of Approaches

[Pittsburgh Pete]

Yes it was taught. I even used it in my demo, and I still have to use today sometimes.

I would not say that it is garbage. I would say that it makes the income approach less of an "income" approach and more a variant of the comparison approach.

One can only use the data that actually exists. If an income approach is required, using substitutes to derive GRMs is one way of doing it. The weaknesses of doing that can be addressed in the reconciliation.

I find that rented homes are a lot like land sales - there are far more of them available in most areas than one would think by just reading most residential appraisal reports.

But don't all three approaches to value employ some variant of comparison? How do we get the rents, the GRM (or cap rate), or expenses, etc. All approaches are directly related to the market and rooted in comparison of some sort. The income approach is no different under any circumstance.

 

[CANative]

The SA is straight forward and easy for anyone to follow along with.

The CA is subtle and mysterious and for some it makes more sense than it should.

The IA is elegant and logical and makes perfect sense although most can't follow along with it.

But put them all together and you have a thing of beauty (once you reconcile).

 

[DTB]

You boys do realize that one of the easiest ways to change a property's value is to change its use. i.e. from rental to owner occupied? Why do you think that might be?

 

[Pittsburgh Pete]

You boys do realize that one of the easiest ways to change a property's value is to change its use. i.e. from rental to owner occupied? Why do you think that might be?

Because of ignorance of the concept of Highest and Best Use?

 

[DWiley]

You boys do realize that one of the easiest ways to change a property's value is to change its use. i.e. from rental to owner occupied?

Say what?

The couple that lives across the street form me moved away for a couple of years due to a temproary job transfer. They rented the home until they came back. Are you are saying that the value of that home was different during the time they remted it, just because they rented it?

I can see that the market value might be difefrent if the HBU changes, but not just the U.

 

[DTB]

Because of ignorance of the concept of Highest and Best Use?

How many people outside of appraising give a care about H&BU? Not too many! :icon_idea: It's about their H&BU. :new_smile-l:

 

[CANative]

That's why we look at market actions, not individual actions.

 

[Pittsburgh Pete]

How many people outside of appraising give a care about H&BU? Not too many! :icon_idea: It's about their H&BU. :new_smile-l:

Scary post revealing a distorted view of what appraisers do and why/how they do it!

 

[DTB]

That's why we look at market actions, not individual actions.

I know, and the backed into GRM is part of that action?

You guys better stay appraisers because it appears you haven't learned how to make money in Real Estate.

Your investor is buying cash flow and remainder value. Exactly how is that similar to the owner occupant who is buying some utility with a huge pinch of emotion? What do you think spurred all the condo conversions. Change from investor owner to owner occupant was the main value driver. A rental apt. may have been worth X, owner occupant condo worth XX.

 

[DTB]

Scary post revealing a distorted view of what appraisers do and why/how they do it!

Maybe wearing multiple hats gives you a headache. Based on prior business related posts of yours, I don't think you have that tight of a grip on the pulse of the business.