Cost Approach and those who "mail it in"

[J Grant]

Originally Posted by J Grant
These statements are made by the same group that advocates realtors influencing appraisal selection,

I will just answer this for myself .... my comments have been that one group of appraisers cannot rail against an appraiser traveling 400 miles and doing an appraisal in their territory and then not afford the local Realtor the same reason for the rail. Both can be correct but yet for many of you the Realtor should have absolutely no reason to protect their client from that appraiser becasue afterall they are only Realtors.

Secondly, I have stated and will continue to state any Realtor that would like to ask me questions, some call quizzes, about my experience and knowledge of the market .. I have no issue with. I will answer their questions politely and accurately.
See the real issue is that appraisers believe because they are certifed they can appraise anything their license allows them ... I on the other hand know that if I have accepted the job I am competent because that is a requirement of USPAP.
Offer me the job of appraising a Marina ... sorry I have to pass ... I have never done one, dont know how their value is measured (by the slip I would guess) and I know these things so the Realtor wont ever get to ask me the questions ... Im not going to be accepting the job.


and they also claim realtors are better at vaulation than appraisrs...

I can show you a group of commercial Realtors in Albuquerque that know value as well as any appraiser in the city. Its what they do for a living .. they have a data base second to none ... they understand leasing, they understand expenses, they understand conversion of income to value ... yes there are Realtors that are often better at appraising than appraisers are. Exactly who do you think Appraisers go to when they need the data they use in these assignments .. thats right .. this commercial group of Realtors.


though some of the posts are very solid, and the references to publications are excellent, not all of what this group posts is beyond reproach either.

The world of appraising does not revolve around the residential market. The things that we have posted come from years of experience, study, and learning. It is simply amazing how much appraisal knowledge that commercial experience affords an appraiser that can translate to appraisal of residential properties. The process is exactly the same, even though some will argue it absolutely isnt.
To say that many of us dont know of what we speak is simply a statement of ignorance. Ignorance, in and of itself, is not a bad thing. As my friend MichiganCG says .. You do not know what you do not know ... that being said ... with each further post like the one above stating that we dont get it (paraphrasing) simply proves the point Michigan has made .... You do not know what you do not know.



Originally Posted by J Grant
These statements are made by the same group that advocates realtors influencing appraisal selection,

I will just answer this for myself .... my comments have been that one group of appraisers cannot rail against an appraiser traveling 400 miles and doing an appraisal in their territory and then not afford the local Realtor the same reason for the rail. Both can be correct but yet for many of you the Realtor should have absolutely no reason to protect their client from that appraiser becasue afterall they are only Realtors.

The realtor has a right to protect their client from the appraiser is double speak for realtors should have the right to direct appraiser selection. Most appraisers abhor the idea, do a poll of AI member I bet most would think it is nuts. You seem oblivoius to the massive damage realtors infuencing appraiser selection had in the prior market, how many lives were ruined financially by realtors influencing selection to make the deal work ( these buyers subsequently lost these overpriced homes to foreclosures), the fact that it ruined the careers of honest appraisers etc. Your group acts like it never happened and refuses to acknowledge the reality that it will happen again.

And yes, they are "only realtors"...if they wanted the power to appraise then they should appraise, and if they wanted more power to "protecht their client", then they should become RE attorneys.

Secondly, I have stated and will continue to state any Realtor that would like to ask me questions, some call quizzes, about my experience and knowledge of the market .. I have no issue with. I will answer their questions politely and accurately.
See the real issue is that appraisers believe because they are certifed they can appraise anything their license allows them ... I on the other hand know that if I have accepted the job I am competent because that is a requirement of USPAP.
Offer me the job of appraising a Marina ... sorry I have to pass ... I have never done one, dont know how their value is measured (by the slip I would guess) and I know these things so the Realtor wont ever get to ask me the questions ... Im not going to be accepting the job.

I also turn down jobs I don't feel qualifited for, and appraisers are supposed to . But I make the decision what I feel qualified for, I don't want a realtor to make that decision for me.

There are abuses present in the AMC system and especially as it involves staff appraisers, cause how can a staff appraiser turn down an assignment? But that should be fought other ways then shifting the selection to realtors.

and they also claim realtors are better at vaulation than appraisrs...

I can show you a group of commercial Realtors in Albuquerque that know value as well as any appraiser in the city. Its what they do for a living .. they have a data base second to none ... they understand leasing, they understand expenses, they understand conversion of income to value ... yes there are Realtors that are often better at appraising than appraisers are.

Then these realtors who are supposedly better should be appraisers. No matter how knowledable they are, their vested interest prevents them from appraising their own deal, even if they had an appraisal license on the side.

Exactly who do you think Appraisers go to when they need the data they use in these assignments .. thats right .. this commercial group of Realtors.

Realtors are a recognized data and verification source in res and commercial appraising. I would agree they have more information due to leases, occupancy etc in commercial. Get all the information you want from them. But gathering information is different from allowing them to influence value, or influence appraiser selection.

though some of the posts are very solid, and the references to publications are excellent, not all of what this group posts is beyond reproach either.

The world of appraising does not revolve around the residential market. The things that we have posted come from years of experience, study, and learning. It is simply amazing how much appraisal knowledge that commercial experience affords an appraiser that can translate to appraisal of residential properties. The process is exactly the same, even though some will argue it absolutely isnt.
To say that many of us dont know of what we speak is simply a statement of ignorance. Ignorance, in and of itself, is not a bad thing. As my friend MichiganCG says .. You do not know what you do not know ... that being said ... with each further post like the one above stating that we dont get it (paraphrasing) simply proves the point Michigan has made .... You do not know what you do not know

Trust me, there have been statements made in some of the posts that are simply not correct, or very dogmatic and not recognizing other methodology. Yes, you guys have a lot of wisdom and experience to impart, and we appreciate it. But others on the board to as well. I have 19 years experience, including review experience, high end unique home, new construction, small income etc, and have a very good track record of solid values.

Yet when I , or others on the board put forth a theory that does not agree with your group, you do not handle it professionally. You start making fun of people, or make statements such as "It is really sad that appraiser X doesn't understand ANYTHING about the cost approach...." and so on. That unprofessionalism, name calling, and support of realtor selection of appraisers tends to undermine the expertise you offer, which is a trade off because much of the information you offer is valuable.

The commercial field from what I understand had a lot of bad appriasals and over inflated values and a high default rate (I remember reading the banks have a higher rate of default and problem appraisals in commercial than residential, but the sheer larger numbers of res loans made makes addressing the res problem more of a priority ) So it sounds like the commercial side has its share of problems and poor methodology as well, yet your group thinks they can learn NOTHING from a res appraiser and treats every res post that does not agree with yours with disdain, instead of maybe considering someone has a contribution to make.

 

[J Grant]

And where does that GRM come from JGrant? You speak of it as a disembodied factor--it comes from the market and is extracted from sales. If your income approach is 20% lower than the SCA, I would question the data that went into the analysis or the analysis itself.

Of course I know the data comes from the market. So, if you develop an IA 20% lower then SCA, and you "question" the data and the data is correct, the best, most recent, verifiable rental data, then what is left? Change the data to match the SCA??? That is misleading, my friend, no matter what kind of professional spin you want to put on it.

And how do you question the "analysis" itself? The market data shows a rental value 20% lower than the SCA. Did you ever stop to think your SCA is too high? Or that the market is imbalanced, and it it what it is, rental value is 20% lower? That kind of anaylsis does not seem to occur to you, your analysis seems to center around making all the data match up to look good on the report.

 

[J Grant]

And where does that GRM come from JGrant? You speak of it as a disembodied factor--it comes from the market and is extracted from sales.

The GRM is rental income annual divided into sales prices, not extraced from sales....

(just a reminder that anyone posting fast can make a mistatement)

 

[CANative]

People pay more for an occupancy amenity than they do for an income amenity?

 

[Pittsburgh Pete]

Of course I know the data comes from the market. So, if you develop an IA 20% lower then SCA, and you "question" the data and the data is correct, the best, most recent, verifiable rental data, then what is left? Change the data to match the SCA??? That is misleading, my friend, no matter what kind of professional spin you want to put on it.

And how do you question the "analysis" itself? The market data shows a rental value 20% lower than the SCA. Did you ever stop to think your SCA is too high? Or that the market is imbalanced, and it it what it is, rental value is 20% lower? That kind of anaylsis does not seem to occur to you, your analysis seems to center around making all the data match up to look good on the report.

Did the appraiser speak with anyone involved with the purchases from which the GRM was extracted? Did the buyer anticipate increasing/lowering the rents (even if such a scenario is not realistic the buyer's decision was based on an increase/decrease that would impact the GRM)? Did the appraiser verify which expenses were paid by the lessor/lessee for the individual transactions? If the property is a duplex, did the appraiser verify how the utilities are handled--separately metered or included in the rent. There are a myriad of info that could be missed that would result in a 20% variation among the approaches to value. Not only does it seem that some appraisers don't do the requisite research, they don't know what research to complete.

You're obsessed with this "data match" concept when in fact it is doing the necessary research and analysis. You clearly don't understand either the cost or the income approaches and their theoretical underpinnings.

 

[CANative]

The GRM is rental income annual divided into sales prices, not extraced from sales....

For one-unit or small multi-family properties monthly income is used primarily. And yes, the GRM is developed by extracting the necessary information from sales.

 

[Pittsburgh Pete]

And where does that GRM come from JGrant? You speak of it as a disembodied factor--it comes from the market and is extracted from sales.

The GRM is rental income annual divided into sales prices, not extraced (sic) from sales....

(just a reminder that anyone posting fast can make a mistatement)

Say what? Thanks for proving my point!

 

[CANative]

You have to admit that doing an income approach on an SFR is non-sense. And doing a CA and an IA on an SFR is serial non-sense. *Most of the time.

Contestant 1: Alex, I can tell you how much this house should have sold for in 3 steps.
Contestant 2: Alex, I can do it in just 2 steps.
Contestant 3: Alex, I have 10 sales just like the subject that sold for this much. Now you know what it should have sold for.

Sheesh... USPAP tells us you can't provide "filtered listings" unless you call it an appraisal because the client can figure out the value. If it's that easy why do we need the IA and CA?

 

[Pittsburgh Pete]

You have to admit that doing an income approach on an SFR is non-sense. *Most of the time.

I would agree generally. However, in some markets where rentals are common it is a valuable tool. Don't know the Florida market but I suspect that given the market implosion down there, rentals are more common than in other markets.

But if one is going to develop an income approach, one must develop it properly.

 

[J Grant]

]Did the appraiser speak with anyone involved with the purchases from which the GRM was extracted? Did the buyer anticipate increasing/lowering the rents (even if such a scenario is not realistic the buyer's decision was based on an increase/decrease that would impact the GRM)? Did the appraiser verify which expenses were paid by the lessor/lessee for the individual transactions? If the property is a duplex, did the appraiser verify how the utilities are handled--separately metered or included in the rent. There are a myriad of info that could be missed that would result in a 20% variation among the approaches to value. Not only does it seem that some appraisers don't do the requisite research, they don't know what research to complete.[/B]

DOH, yes Mr. Condescending , I do the research, and understand about verifying utlities, expensed paid, etc.

Let's assume the appraiser did this research, and verified that with utilities, expenses paid, etc. the rental GRM is still yielding a value 20% lower than the SCA approach. How do you handle it?

You're obsessed with this "data match" concept when in fact it is doing the necessary research and analysis.

No, you are the one obsessed with the data match...you are the one stating the three approaches should come out the same or very similar close values on the report. I never said that . I do the necessary research and alaysis, and sometimes it yields different values from the approaches. Seems that happens to a lot of appraisers, they just don't tweak the data afterward to make the approaches line up in value.

You clearly don't understand either the cost or the income approaches and their theoretical underpinnings.

This is one of the unsupported, arrogant statements I refer to. I am bringing out legitmate arguments on why the approaches can differ, and you counter with...."You clearly don't understand the cost or income approach"....I can say the same about you, or anyone on this board. Making sweeping statements like this as if you were elected appraisal God and nobody else can question anything you say...I don't think you understand how it comes off sounding.