Extraction Method

[Michigan CG]

I've found that most appraisers I talk to do understand paired sales analysis.

Most appraisers understand paired sales as that is what is taught in their first Principals and Procedures classes and of course by their mentor. However the claim by many that they can derive all of their adjustments based on paired sales is completely bogus.

............ Why would you even need to know the cost of the bathroom and the % depreciation, though? Sorry - I'm just not following...

Why would I NOT know the cost of a bathroom if I am engaged in residential appraising? Or a garage?

Let us take an appraisal where the comps are selling for $120.00/SF. Subtract out the land value and (it is a miracle) the result is the improvements contribute $100/SF after subtracting land.

Cost new of the home (replacement) is $150/SF (these numbers are magical). We now know that the depreciation from all forms is 33%. The bathroom has a cost new of $12,000 and if we have 33% overall depreciation then we have a value of the bathroom at $8,000.

It isn't really that easy because maybe the bathroom is fully remodeled or the bathroom is original; we would need to reconcile the contributory value of the bathroom with our above depreciation estimate and tailor it to out subject property. This I can support if I explain it.

Let us go to the "paired sales" report where we know that the appraiser doesn't use different matched pairs or develop matched pairs on a daily basis, and many times never do they do a paired sales analysis. Take our example above and the appraiser makes a $4,000 adjustment for the bathroom. It is there that he is saying (whether he knows it or not) that the bathroom has depreciated 67%.

 

[Michigan CG]

And I have no doubt that you believe you produce credible results after spending 3 hours on the CA.

That cost approach was developed for a simple new-contruction house.

 

[alebrewer]

Why would I NOT know the cost of a bathroom if I am engaged in residential appraising? Or a garage?

IMO (which is obviously in the minority herein) is that you don't need to know the cost of the bathroom because you're not building a new bathroom. You're estimating market value of the property (or to be technically correct, the rights). In which case, I'd say you absolutely need to know the contributory value of the bathroom, but not the cost... same for the garage.

If you're stating that you need to know the cost in order to competently perform a CA, then I'd agree...

 

[BRCJR]

Beginning to wonder how long Chief has been a Chief.....

 

[Michigan CG]

Beginning to wonder how long Chief has been a Chief.....

Be nice. This is a discussion.

 

[George Hatch]

Beginning to wonder how long Chief has been a Chief.....

This contributes nothing to the discussion. Everyone has to refrain from pushing buttons. Somebody has to go first.

 

[Michigan CG]

IMO (which is obviously in the minority herein) is that you don't need to know the cost of the bathroom because you're not building a new bathroom.

How do I figure out my bathroom adjustment without knowing the cost of a bathroom when no paired sales exist?

 

[Michigan CG]

If you're stating that you need to know the cost in order to competently perform a CA, then I'd agree...

For the cost approach I DON"T need to know the cost of the bathroom but since I can use a cost estimator or cost comparables.

 

[alebrewer]

How do I figure out my bathroom adjustment without knowing the cost of a bathroom when no paired sales exist?

Well, there is the possibility of statistical analysis, and there is also the possibility of applying grouped data analysis. If you're implying that residential appraisers routinely apply depreciated cost for individual adjustments on every appraisal they perform, you're one of the most optimistic folks I've EVER met...

 

[Artemis Fowl]

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...

Because all the approaches are related. That matched pair(s) is revealing contributory value in a SCA and depreciated cost new in a CA. This should reveal just how relevant a properly executed CA can be for adjustment support.