Extraction Method

[djd09]

if you cannot read and understand the certs , do not do fannie work.

 

[Tim The Enchanter]

Yes it is.

An argument isn't just contradiction. It is a connected series of statements intended to establish a proposition.
Not just automatically disagreeing with whatever the other person says.
Anyway, your 5 minutes are up.
Please move on to the next room for being hit on the head lessons.

 

[djd09]

more Kookiforlian bias.

 

[Tim The Enchanter]

Ahh right. It's the illiterati thing again.

 

[djd09]

See post 198, my bias friend. ( No, it is not. )

 

[alebrewer]

Maybe time for another thread but I can assure you that the cost approach is meaningful for residential assignments in multiple ways but I don't want to muddy the waters here with that discussion.

Be a great thread to start. And to clarify, IF: (a) the appraiser has an accurate assessment of site value, (b) an accurate assessment of RCN, (c) an accurate assessment of accrued depreciation from all forms (P,F,E), and (d) an accurate assessment of the contributory value of the site improvements, then I'll grant that the cost approach MIGHT return a meaningful estimate of market value. To djd's point, though, even the term 'market' in the type of value being appraised infers sales comparison (i.e. what the 'market' is doing). I would submit that the amount of research necessary to truly obtain accurate assessments of a, b, c, and d, make the cost approach prohibitive to perform, AND if an appraiser performs the cost approach without an accurate assessment of ALL of a, b, c, and d, he/she is potentially producing misleading results.

 

[alebrewer]

And there is a thread about this very subject about a year ago that FNMA says you may give weight to the other approaches on the 1004.

I'd love for you to direct me to any place where Fannie (or Freddie for that matter) has made an official statement that the appraiser can give weight to the cost and/or income approaches when reporting on the 1004. Seriously - I'm not being sarcastic.

 

[alebrewer]

I understand what you are saying although it is a bad interpretation. Go to Appraising Residential Properties, 4th Edition, page 250.

".............To estimate land or site value by extraction ......... the appraiser deducts the contributory value of teh improvements from the total sale price of EACH COMPARABLE........"........... " ......... The resulting indications are then reconciled into an opinion of land or site value for the subject....."

I also think you are inferring you that you can use the subject property for exxtraction which you cannot. The reason is the same for an income property; you don't derive the GRM from the subject by dividing the sale price by the rent. It is an incestuous conclusion.

So there is a difference in ACTUAL VERBIAGE between the two texts (not a difference in interpretation). I would be perfectly ok with an appraiser defending his/her extraction methodology via Appraising Residential Properties. I'd also be perfectly ok with an appraiser defending his/her extraction methodology via The Appraisal of Real Estate. And for the, maybe 30th time?, I have never said you 'should' only use one sale. I've only said that, per The Appraisal of Real Estate, it is acceptable.

 

[alebrewer]

I also think you are inferring you that you can use the subject property for exxtraction which you cannot. The reason is the same for an income property; you don't derive the GRM from the subject by dividing the sale price by the rent. It is an incestuous conclusion.

IF your estimate of contributory value of the improvements for the subject property is accurate (we can cover the chances of that in another thread as well, but hang with me for a moment), and IF you have accurately determined the market value of the subject property, then the difference between the two HAS to be an accurate assessment of the subject's site value, does it not? It's simple logic. If A=market value, and B=depreciated value of improvements, and C=estimate of site value, then it necessarily follows that A-B=C. Again, and as I've said MULTIPLE times, the validity of the extraction results is obviously strengthened by the use of multiple properties, but that does not negate the fact that A-B=C.

 

[Joe Flacco]

Using only the subject property to extract the site value for the cost approach defeats the purpose of developing the cost approach. That is not a credible cost approach because then you are just putting in numbers in the cost approach section to match your final opinion of value. Why even do it.