Economic obsolescence

[CANative]

Looking for a quick way to estimate it without having to do full blown market study or statistically significant analysis.

D'oh!

 

[SANDY]

Try reading The Appraisal of Real Estate, 13th Edition, Page 444.

And after that dry up and blow away.

Sorry-theoretical references don't cut it here. You read it and provide specific method for applying it.

 

[CANative]

http://www.american-appraisal.com/US/Library/Articles/Identifying-and-Quantifying-Ec.htm

 

[Mr Rex]

Not good enough. Prove it with numbers not by inference.

OK, <moderator edit>, just another BS Sandy thread. Go crawl back under your rock, where you are most useful.

 

[Scott R Marshall]

Pretty good answer. But plugging a number in the cost approach for economic obsolescence that brings it in line with your market approach value represents at
best an adjustment based upon inference.

Are there other ways to utilize market data to calculate or measure the estimated economic obsolescence?

There are cost handbooks out there. Granted, doing a thoroughly accurate cost approach would be very time consuming but a "ballpark" figure is good enough in most cases. Some cost handbooks may be a bit out of whack based on what typical costs are within a market, but then its up to the appraiser to account for those market factors.

I don't plug in numbers into my cost approach to make them line up with my SCA. And as a result, economic obsolescence is fairly easy to determine. Couldn't care less if my cost approach without a economic (external) obsolescence adjustment comes out 10,000's of thousands if not $100,000+ higher. Just like I didn't care when my cost approach was $10,000's lower then my sales comparison approach during the boom.

 

[CANative]

OK, **, just another BS Sandy thread. Go crawl back under your rock, where you are most useful.

All these years on the forum and I've NEVER seen a thread with SANDY in it that contained no BS. I'm sick of this member.

 

[Meandering]

Pretty good answer. But plugging a number in the cost approach for economic obsolescence that brings it in line with your market approach value represents at
best an adjustment based upon inference.

Are there other ways to utilize market data to calculate or measure the estimated economic obsolescence?

Do cost approaches on your comps, compare what they sold for.

Oh wait, that would be a ton of work.

 

[CANative]

SANDY is just confused. Economic obsolesence IS external obsolesence. In this case there are no externalities caused by things like being next to a hog rendering plant. The problem is that there is a supply problem. No one will build a house because there is no profit to be made due to the imbalance in supply and demand. Yet SANDY is forced to build a theoretical house but the CA turns out to be much higher than market sales of similar property.

If there is no physical or functional depreciation going on and there are no hog rendering plants nearby then the difference is externalities (economic obsolesence.)

 

[SANDY]

There are cost handbooks out there. Granted, doing a thoroughly accurate cost approach would be very time consuming but a "ballpark" figure is good enough in most cases. Some cost handbooks may be a bit out of whack based on what typical costs are within a market, but then its up to the appraiser to account for those market factors.

I don't plug in numbers into my cost approach to make them line up with my SCA. And as a result, economic obsolescence is fairly easy to determine. Couldn't care less if my cost approach without a economic (external) obsolescence adjustment comes out 10,000's of thousands if not $100,000+ higher. Just like I didn't care when my cost approach was


I don't know of any cost handbooks that give you an economic obsolescence calculation. Like you said-it's up to appraisers to account for economic obsolescence. I understand that appraisal course teach the inference method you mentioned before.

However we have been having numerous resistance to just leaving the cost approach hanging out there like a sore thumb being so much higher. When we re-load and provide an adjustment (by inference per the standard methodology an including an explanation of it) then we get the stip wanting market based evidence to support the economic obsolescence adjustment.
Maybe we just have some pain in the butt clients but the adjustment h
as been typically huge and glaring to anyone reading the report. This is despite language in our reports indicating that the cost approach is not being relied on due to the age of the improvements.

Maybe their insurance companies that they ship it to are not happy because it lowers their premium but I don't know.

 

[SANDY]

SANDY is just confused. Economic obsolesence IS external obsolesence. In this case there are no externalities caused by things like being next to a hog rendering plant. The problem is that there is a supply problem. No one will build a house because there is no profit to be made due to the imbalance in supply and demand. Yet SANDY is forced to build a theoretical house but the CA turns out to be much higher than market sales of similar property.

If there is no physical or functional depreciation going on and there are no hog rendering plants nearby then the difference is externalities (economic obsolesence.)

Your lack of understanding of appraisal principles is astounding!