The Cost Approach - North Carolina

[George Hatch]

I don't think a threat should be necessary.

This assignment included certain assignment conditions (fact)
The appraisal report didn't address all the assignment conditions (fact)
Failure to meet these assignment conditions puts the workproduct in violation of the SOWR (fact)
The omission needs to be remedied in order to meet the terms of the assignment (fact)

It ain't personal, it's just business.

 

[ramrcdk]

I don't think a threat should be necessary. This assignment included certain assignment conditions (fact)
The appraisal report didn't address all the assignment conditions (fact)
Failure to meet these assignment conditions puts the workproduct in violation of the SOWR (fact)
The omission needs to be remedied in order to meet the terms of the assignment (fact)

It ain't personal, it's just business.

Agree, of course BUT if there is an educator not being clear...or otherwise the appraiser being mis-informed...as in using that as a continued comment to omit the CA... IT IS bad... business.

 

[Overimprovement]

3 things:
1. Remember some boards have folks on them that have never appraised one property, so an uninformed person might be making the statement.

2. Even IF the person making the statement is a 40 year MAI, and clearly makes that statement, a state Board does not make law, and appraisers are under zero obligation to follow them. Boards are mainly judicial in nature, with some administrative function, but NOT legislative (at least in my state). The statutes dictate applicable laws, and USPAP is still applicable UNLESS it conflicts with local law, not with local board member opinion.

3. I also strongly doubt the veracity of the appraiser. Really sounds like A) too lazy or busy, let's try to get out of doing more work, or B) Oops--got caught with my pants down, lets pull out the old excuse book. My dog ate the report--no that was for the 1980s. Oh, here's one, my Board says the CA sucks and I shouldn't use it. Right next to my grandmother died, that's why the report was late.

At this point, not only is this person's competence in question, but their ethics as well, for not just owning their omission, or error in judgment, whichever it was, and instead possibly lying.

 

[Andrei Fin]

Applicable for new construction, or applicable for new construction on an individual site? Because the typical buyer isn't going to purchase 50 sites and enjoy the subsequent benefits of scale.

 

[George Hatch]

I think we all recognize that the appraiser's value conclusion on the bottom line isn't the only relevant piece of information to these users that appears in an appraisal report. There are other elements that they may find meaningful and useful to their decision making.

So whether we appraisers think the users are right or wrong about what they consider meaningful is very nearly irrelevant except to the extent that "meaningful" to a user could possibly fall below the effective minimums that our standards require. So just the fact a user thinks the info is meaningful to them should be taken at face value. It is not our role to dictate to the clients what they can and cannot ask for or consider.

The appraiser obviously isn't compelled to find a CA approach as meaningful to them as to their users, but if they agree to the terms of the assignment and that's one of the terms then it becomes applicable to the assignment as an assignment condition.

 

[CANative]

And has anyone ever had their completed CA questioned by anyone in the review process?

Only once. By a loan dept rep from IndyMac who said I included too much E.I. and it would blow his deal. I'm still here. IndyMac not so much.

 

[CANative]

We are responsible for credibility. Not reliability. They are not the same thing. Anything can be completed in a credible manner. Reliability is not our problem.

Appraisers who try to make the CA match the SA and can't and then say it is not reliable are trying to do another SA and calling it a CA.

 

[George Hatch]

Good point. Most of my appraisals have different value indicators from the different approaches to value. Sometimes by a little and sometimes by a lot.

I've told my clients on several occasions that based on the disconnect between the CA and the SC the proposed project was not financially feasible. Those borrowers sometimes go to a different lender and get the deal done anyway. Happens.

 

[Carnivore]

There is always going to be possibility of disparity between the two approaches ..sometimes its significant. Where the SCA has some weakness is that buyers are just that buyers...except some see things differently than others. Why did they buy that house for the price they paid? Well it could be next door to mama or its close to work, or its where they want their kids to go to school. etc etc...the reasons are almost endless. Thats a lot of noise! We do know that most home buyers do so for the break in income taxes...thats a constant reason. We also know they want shelter...another constant. They got to live somewhere. Some buy for status...just more noise to sort out. Income is a big deal, many buy at the max their income will allow.

The cost approach is the same way. The numbers they have for cost service also has noise ...Some builders are really business savvy, others are not... Some have lower margin expectations...others wont get out of bed for low margins...

How we sort it out is the real work we do.

 

[Joe Flacco]

The only reason the cost approach would not be close or in the ballpark of the sales comparison approach is because depreciation is not taken into consideration