Cost Approach and those who "mail it in"

[PropertyEconomics]

The Cost Approach value is a MEANINGLESS number unless the property is new construction.

Another Certified General who should mail back their certification .... seriously .... just mail it in and go back to whatever work you were doing before fooling the appraisal board you knew something about appraisal.

PS ... tell you what .. I will even take up a collection to pay for the stamp and envelope for you to put the certification in and if youd like I will have a courier service pick it up for you .... deal?

 

[JSmith43]

Jgrant got almost 30 pages and didn't have to mail hers back. There must be a higher standard for CG posters.

Actually, I'm proud of all the posters that donated so much time and talent in trying to enlighten the J persona. It takes a lot of patience. The twists and turns of self justification of a strongly held, but faulty position are obvious to most readers, but have presented an opportunity for readers in general to review the CA. It presented a challenge to them to think critically about their own operating assumptions with respect to proper development of the CA.

Back to the blasphemous CG:

With a screen name of JamesRockford, you may be pulling our leg, or perhaps, you were just asking to be beat up (like Jim Rockford-Rockford Files).

Please post some clarifications or at least some clues to support your sweeping statement. Thanks in advance!

 

[J Grant]

Carry on ... and pray your true lesson of appraisal doesnt come at the hands of your appraisal board. Chances are very great there are at least some on your board that fully understand the concepts, the theories and the methodologies .... perhaps when they tell you or suggest you take a class you will learn.

While I appreciate the published reference you provided on on ec obs and you made a good case for including it, other elements of my arguments are sound esp 3 approaches to value...just as a point of interest (hate to jinx anything with state boards) But this is a fact and you are welcome to come over and review the files. The one and only time I was ever called by state board re a complaint was for a review I did of a cert general's appraisal report that he did on a residential property.

I just happened to get assigned the review. The value was inflated, including the cost approach with a ridiculous high land value. I came up with a different lower value and three new comps in the review . Anyway, he did not like my review, and filed a complaint to the state board about it...of course I got a copy of the complaint, 5 pages filled with verbiage, where he tried to attack every sentence in my review, and threw out numerous USPAP violations into the mix (hoping something would stick, I suppose was his strategy). After almost a year, the final disposition of the case was there was nothing wrong with my review, and the state board dismissed his complaint withouth cause.

If the state board ever recomends I take a class, I will, but hopefully it won't ever come to that, but one never knows in this field. Though I don't own the texts you reference, I take cont ed and research the field through online articles and references. I am explaining what happend in the state board case as you sometimes make unfounded remarks in your posts...the one about a state board was pretty over the top...are you trying to win a non popularity contest, by insulting other appraisers? Such as telling a cert general he should mail his license back? Do you need perhaps a bit of skills in the tact department? Witholding judgement on appraisers you don't know personally and that you have never seen their work? (hint, hint)

 

[J Grant]

Hi Mentor...the J persona is still here!! (stubborn), good you have a sense of humor, one needs it in this field and for this board as well!

 

[JSmith43]

JGrant, I like it when PE gets cranky and says pointedly what is on his mind, perhaps only filtered for swear words:icon_lol:

Some of us can then play good cop for a while. Occasionally, it helps flesh out a situation.

 

[PropertyEconomics]

I just happened to get assigned the review. The value was inflated, including the cost approach with a ridiculous high land value. I came up with a different lower value and three new comps in the review . Anyway, he did not like my review, and filed a complaint to the state board about it...of course I got a copy of the complaint, 5 pages filled with verbiage, where he tried to attack every sentence in my review, and threw out numerous USPAP violations into the mix (hoping something would stick, I suppose was his strategy). After almost a year, the final disposition of the case was there was nothing wrong with my review, and the state board dismissed his complaint withouth cause.

When you CAME UP with that value ... you realize you were no longer reviewing but appraising right?

So you provided a review and an appraisal fully in compliance with Standards 1, 2, and 3?

And for the record ... I only read what the appraisers write and realize how utterly ingorant of the field of appraisal they are and make my posts after that. A CG that doesnt understand the importance of the cost approach in so many many instances truly should mail in their certification. Hey Im doing my part to protect the public ... as mandated by USPAP .....

 

[J Grant]

PE, Yes I was appraising, 3 new comps and all, what a PITA that job turned out to be...I try to avoid review work now but sometimes get stuck with one...

None of us can see each other's work and we do respond to what is posted here, we can control how out to lunch our responses are....anyway the posts are informative and make one think for sure!

 

[Meandering]

Another Certified General who should mail back their certification .... seriously .... just mail it in and go back to whatever work you were doing before fooling the appraisal board you knew something about appraisal.

PS ... tell you what .. I will even take up a collection to pay for the stamp and envelope for you to put the certification in and if youd like I will have a courier service pick it up for you .... deal?

Mr. Rockford,

PE and I never agree, but here I agree with him. So for that sir you have helped us to find common ground, but for you, sad to say, there is something lacking in your training and understanding of the techniques and methodology of appraising to make the comment you did.

 

[KenAZ]

Mr. Rockford,

PE and I never agree, but here I agree with him. So for that sir you have helped us to find common ground, but for you, sad to say, there is something lacking in your training and understanding of the techniques and methodology of appraising to make the comment you did.

I am in disagreement with all of you. In order to do an accurate Cost Approach, it takes as long as writing up a 1004. The M&S version is not an actual CA. It is actually useless for determining Market Value.

M&S does not provide actual costs. Have any of you actually determined actual costs? It is far different than what you get from M&S. When some of you tell me that you do an actual CA using actual costs, then I will respect your opinion on the reasonableness of including these in your reports.

If any of you think that filling out the mutli-page M&S form is a real CA, guess again. All it is, is form filling. You are readiing the M&S manual, looking up the indicated costs and plugging them into a form.

Imagine doing that for the Sales Comparison Approach. Make adjustments according to what some special "Adjustment Book" tells you. I know we joke about the "Adjustment Book" in this forum, but when you use M&S that is actually what you are doing. To be it is laughable, but sad, because that is what many of you think is a real CA.

That is why FNMA stopped requiring the CA. It is actually useless for Market Value. The only entity that actually cares about cost is an insurance company. That is it. If you want to find out the cost of a new build, then why not just ask that actual builder? The home is getting built. Find out how much it cost to build it from the actual contractor? That would be far more reliable than using M&S, and the information is typically available.

What are you going to do?

1) Contractor provided documentation that the cost to build is $110,000.

2) The owner provided three bids for this home ranging from $110,000 to $120,000.

3) M&S states that the cost to build is $95,000.

Are you going to rely on M&S and say that all of the bids and the current contractor have no idea about local costs? Somehow M&S says that it will only cost $95,000, when there is no contract in his right mind that would build the home for that little?

The CA is uselful if it is done correctly (Which it never is in residential appraisal work). It is usefull to determine the cost to build the home. Nothing more, nothing less.

 

[Meandering]

Ken,

No one said that MS was the end all of the cost approach. I have worked for several builders and have kept up with their costs/charges and profit requirements, plus I track new spec home sales. But that's not so hard in my area as it is not fully developed and we have more than enough available land, so land sales are not usually an issue either. It's also very easy to call and/or email photos over and discuss rough estimates for costs to cure, all of this makes the cost approach relevant, and when you do a lot of new construction, both commercial and residential, you have the cost estimates for each project which helps you build a database that you use to compare with M&S.

The cost approach is relevant, especially when considering the highest and best use as improved. Because, that is not a check box answer and requires the consideration of the cost approach. Even with plenty available land, we still raze some to rebuild on the land. Terrel makes a very good point, one that we saw during the subprimes, some 20 year old homes were listed for sale for higher prices than new construction, and that is why you must always consider the cost approach in residential work, because it is relevant.

But to say that unless a building is new, the cost approach is not relevant, that is just plain wrong. Especially when considering special use buildings like gas stations and churches and agricultural properties. Blanket statments about applicability or relevance of any approach to value should always be avoided.

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