Extraction Method

[alebrewer]

But weren't you using more/less the same rationale about the CA?

Possibly - I've yet to hear his rationale, so I can't opine at this moment. If his opinion is that the IC cannot be developed because he doesn't believe it to be a credible methodology of estimating MV for residential properties, then yes. Is that what you're asking?

 

[Michigan CG]

I'd be VERY interested to know why an IC isn't applicable just because a property is not generating income...

Why would it be applicable?

 

[alebrewer]

Paired sales is cited by many appraisers who have never developed a paired sale in their career and would have people believe that they are hanging like fruit from a tree.

Paired sales, if one really has them, are the result of the depreciated cost. If one truly finds a paired sale for say a bathroom and that paired sale shows $6,000 and the cost new of the bathroom is $12,000 then we have an indication that the bathroom improvements have suffered 50% total loss.

I've found the opposite, MCG. I've found that most appraisers I talk to do understand paired sales analysis. That, however, may be a skewed segment of the population, so I cannot disagree with your experience. Why would you even need to know the cost of the bathroom and the % depreciation, though? Sorry - I'm just not following...

 

[alebrewer]

Why would it be applicable?

It might not. But I wasn't aware that it's not applicable just because it's not currently generating income? What about a vacant warehouse? I'm not a commercial appraiser, but why would the IC not be (potentially) a relevant approach in that situation?

 

[Michigan CG]

Possibly - I've yet to hear his rationale, so I can't opine at this moment. If his opinion is that the IC cannot be developed because he doesn't believe it to be a credible methodology of estimating MV for residential properties, then yes. Is that what you're asking?

You have stated earlier that you think that the cost approach would possibly be not credible and may even be misleading. If done correctly a cost approach can not only be credible but the main consideration of value for a property. The last time I did a cost approach it took me three hours; I can assure you it was very credible, reliable and applicable.

An income approach for a house in suburbia where there are no rental properties gets us into the lack of data for such an approach and while the approach can be credible, it might not be very reliable or applicable.

 

[CANative]

You related to Bert?

I almost typed that. LOL

 

[George Hatch]

Again, what's applicable to any assignment includes those elements which the users consider meaningful/not misleading to their usage of those appraisals.

I do things in my appraisal assignment that I don't need to do in order to get to my opinion of MV. "Applicable as an assignment condition" is a thing.

 

[CANative]

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%.

Can't this also be true to increases or decreases in EI?

 

[alebrewer]

You have stated earlier that you think that the cost approach would possibly be not credible and may even be misleading. If done correctly a cost approach can not only be credible but the main consideration of value for a property. The last time I did a cost approach it took me three hours; I can assure you it was very credible, reliable and applicable.

An income approach for a house in suburbia where there are no rental properties gets us into the lack of data for such an approach and while the approach can be credible, it might not be very reliable or applicable.

I can appreciate your opinion (unlike some folks on here) that the cost approach might be relevant. And I have no doubt that you believe you produce credible results after spending 3 hours on the CA. In addition, I've said repeatedly that, in certain situations the cost approach may be the main consideration of value for a property. The example I've used is a state prison. You would further get no argument from me that the IC might not be applicable, given your scenario. My question of Zephyr was, why is it not applicable just because it's not currently generating income - which was the statement that he made.

 

[George Hatch]

Can't this also be true to increases or decreases in EI?

I always thought so, and have always acted that way in developing those CAs. Sometimes it's more profitable to build than others, just like sometimes it's not feasible.