Cost Approach and those who "mail it in"

[J Grant]

m2: m2:

It's an indication of market value because we have declared in our certification that our opinion is market value which we further defined.

You should quit while you're behind.

I realize what you are trying to say (you're trying to avoid stating that the results of the CA is the market value instead of the results of the other approaches.)

Just say this:

Indicated Market Value by the Sales Comparison Approach. $125,000
Indicated Market Value by the Income Capitalization Approach: $121,000
Indicated Market Value by the Cost Approach: $130,000

The property under appraisal is a single family residence. The income approach is not typically relied upon for this property type as it is more commonly purchased for owner occupancy instead of it's potential for generating investment income. The cost approach is most reliable for new or proposed improvements because there is little depreciation to consider. The best approach for owner occupied single family residential property is the sales comparison method because it is a direct reflection of market activity. Sale #1 is the most recent, most similar and most proximate property and required fewest adjustments. Sale #1 is the best indicator of Market Value for the subject property as of the effective date of the appraisal.

My opinion of market value is: $125,000

The above is what I do in my reports, thanks!

 

[incognito]

From about 20 pages ago in this thread I initially challanged the notion:

Quote:Originally Posted by incognito
A "value indicator" that may not reflect "market value"?..??..


J. Grant wrote:
All the three approaches to value, CA, SCA, and icome, are value indicators and not market value indicators till an appraiser decides to rely on any of them as MV indicators, and states that in the reconcilliation.
Getting late and tired maybe someone else can address this too...a fundamental of appraising.

I think you may been taught this by a former mentor, and you truly believe it, but I think what everyone is KINDLY trying to point out is that this IS NOT a fundamental of appraisal.

 

[JSmith43]

Its like a virus that mutates.

My PC came down with one after I failed to restart the AV program after an install that needed the AV software disabled temporarily.

The programmer must have written game software at one time. Just enough control was rendered to the user to give him hope of a solution.

The AV was blocked, so I couldn't turn it on. The cursor would point to the desired program, I'd click, but a different program would open (mapping all screwed up). Control Alt Delete was only partially operable, I couldn't shut down any process.

It got to be a more & more sophisticated cat and mouse game as the program anticipated normal corrective/defensive moves. After about 2 hours I'd been effed with enough.

Hard shut down was the only option. Restart was not helpful. Same crap. Another hard shut down. I ripped that stink-en drive by the throat out of my PC & locked it up inside a USB enclosure.

I marched it upstairs where I fired up an older PC with a virgin XP install & made sure the AV protection was on and current. I plugged in the demon drive & scanned it until the AV quarantined the particularly nasty trojan. Banished & scanned it again, different AV program. Gott'em all. The God of bits & bytes can sort it out, I thought to myself as I emptied the trash.

Congressman Weiner

 

[Michigan CG]

......Again, I could come up with a credible opinion of income value. But does this mean it is also market value?

I give up.

 

[J Grant]

Incognito, in all the diff value purposes...if the appraiser s trying to develop liquidation value, or insurance value, or market value...the appraisr is always using market data (whatever kind of data is there?), and then they develop any of the 3 approaches and get value indicators...the appraiser then forms an opinon of liquidation value, or market value, or insurance value, etc, from the value indicators.

Of course, when the appraiser starts out , they know the SOW of the report is to develop an opinion pf MV, or LV, or whatever kind of value the user/client is looking for.

But still, the value indicators themselves are "neutral", till the appraiser analyzes them and decides that yes, this one is reliable for MV, or LV, or whatever TYPE of value they are trying to form a credible opinion of.

We, humans, divide value into "types", but the values themselves are neutral as they are derived from market data, which is neutral...value becomes a type of value, when we assign certain standards to it, or paramters around the development...we may start off with the same data, but end up with different value opinions from the indicators depending on if we are looking to form an opinon of market value, or liqudiation value.

 

[Mr Rex]

I give up.

Anybody have a used copy of The Appraisal of Real Estate they would like to donate? We can take up donations for shipping to the Sunshine State. It is evident that some need to catch up on their reading, or at least refresh their memories on many things appraisal. I'm just saying...

 

[Couch Potato]

JGrant,

If you were to receive and appraisal order for a new construction duplex and the client had a specific SOW that they only wanted to have a cost approach could you come up with a credible opinion of value?

Yes, assuming I could find a land value, and had cost approach data , I could come up with a credible opinion of value based on the cost approach for the duplex . However, the opinion of CA value might still be different from market value, even though the CA value could be credible in itself (credibly derived from a land value extracted or done by vacant land sales and using credible cost guide + profit sources)

The next assignment is to only use an income approach on the same property. Could you come up with a credible opinion of value only using the income approach?

Again, I could come up with a credible opinion of income value. But does this mean it is also market value?

 

[Couch Potato]

Anybody have a used copy of The Appraisal of Real Estate they would like to donate? We can take up donations for shipping to the Sunshine State. It is evident that some need to catch up on their reading, or at least refresh their memories on many things appraisal. I'm just saying...

I am headed to Florida next Friday so I could drop it off.

 

[JSmith43]

And so I bid farewell to this dying thread, borrowing from the mortal words of William Shakespeare, because Joe Biden was temporarily unavailable.

She should have died hereafter;
There would have been a time for such a word.
To-morrow, and to-morrow, and to-morrow,
Creeps in this petty pace from day to day
To the last syllable of recorded time,
And all our yesterdays have lighted fools
The way to dusty death. Out, out, brief candle!
Life's but a walking shadow, a poor player
That struts and frets his hour upon the stage
And then is heard no more: it is a tale
Told by an idiot, full of sound and fury,
Signifying nothing.

 

[CANative]

I hate Shakespeare. And you guys are mean.