Extraction Method

[alebrewer]

I think you already know the answer to this question...hopefully.

I do not, sir, but I'm very happy to sit at your feet and learn.

 

[Michigan CG]

Why would the income approach not be credible just because a property is not income producing?

I don't think you can say an income approach would not be credible but in a typical residential appraisal where the home has little chance of being a rental it is not applicable.

All three approaches are intertwined, income more so with commercial than residential. I can certainly use an income approach for a garage adjustment by applying a GRM but a cost basis (depreciated cost) would be more common in the residential world.

The SCA is intertwined with cost for all residential properties as any adjustment made to a comp is the result of depreciation or in the case of new construction maybe no depreciation. There are many appraisers who do a cost approach on all of their sales to derive adjustments or support adjustments.

They do that cost approach and in that approach they segregate the land value. Should they have no land sales then they would be able to use extraction because they have gone through the process the correct way as described in the AI book I referenced earlier.

 

[alebrewer]

I don't think you can say an income approach would not be credible but in a typical residential appraisal where the home has little chance of being a rental it is not applicable.

That is different than saying that an income approach isn't credible just because it's not an income producing property...

 

[alebrewer]

I can certainly use an income approach for a garage adjustment by applying a GRM but a cost basis (depreciated cost) would be more common in the residential world.

Wouldn't paired sales analysis most likely be more reflective of what the market would be willing to pay for a garage, as compared to a depreciated cost basis?

 

[CANative]

Ale is very good at making an argument for the least amount of due diligence an appraiser can get away with. Which I guess is okay, particularly for some BIG and GREAT institutions.

 

[alebrewer]

Ale is very good at making an argument for the least amount of due diligence an appraiser can get away with. Which I guess is okay, particularly for some BIG and GREAT institutions.

same old passive/aggressive behavior - I should just get used to that coming from you. I've never made an argument for the least amount of due diligence an appraiser can get away with. What I've said is that nowhere in Cert 4 is the appraiser certifying that he/she developed their opinion of value, in whole or in part, on the CA (fact). I've also said that I do not believe the CA is necessary for credible results in (most) residential assignments (my opinion). Not sure how that translates into me being a proponent of the least amount of due diligence I can get away with?

RE the big and great comment - too funny!

 

[George Hatch]

The way I look at SFR assignments got broader after I got involved with non-res assignments. I didn't drop anything I had understood before, but I have added things.

 

[alebrewer]

Still waiting on Zephyr to teach me why the income approach would not be credible just because a property is not income producing?

 

[alebrewer]

The way I look at SFR assignments got broader after I got involved with non-res assignments. I didn't drop anything I had understood before, but I have added things.

I think that's probably true for anyone. The more you're exposed to, the more you're forced to hone your skills.

 

[George Hatch]

I've been toying with the idea for several years of tracking GIMs in relation to the RE cycles as an indication of where the current rent/price ratios are in relation to the highs/lows of the previous RE cycles. That sort of analysis wouldn't be all that useful in developing an opinion of MV but it might still yield some meaningful info to a reader as to what kinds of risks they're running by offering a 95% LTV now as opposed to 3 years ago when the GIMs were a lot lower.

One impediment to incorporating that kind of analysis in an appraisal report is that the readers might not want to have an indication in an appraisal report that the current GIM of 200x is approaching the prior peak of 210x, because that might amount to a warning that now might not be a good time to offer that loan at 95%.