New condition property with damaged flooring "as is."

[Terrel L. Shields]

It isn't an analysis of why people improve their properties.

? You build a barn to operate your farm and generate more income. The builder does not charge EP and does not offer the property for sale. The EP is the value in use...which isn't going to be reflected in the value in market. Many barns are going to contribute less on the day they were finished than they cost, but the incentive is that the barn makes the (intangible) operation of the farm more profitable. And personal property (say the hogs, cows, or chickens the barn was built for) are outside the real property improvements.

 

[alebrewer]

It is kind of like "waterworld" because you stay underwater a lot.

Again - not following? Maybe I drank too much for Christmas...

 

[George Hatch]

? You build a barn to operate your farm and generate more income. The builder does not charge EP and does not offer the property for sale. The EP is the value in use...which isn't going to be reflected in the value in market. Many barns are going to contribute less on the day they were finished than they cost, but the incentive is that the barn makes the (intangible) operation of the farm more profitable. And personal property (say the hogs, cows, or chickens the barn was built for) are outside the real property improvements.

You know, adding the non-realty interest involved with that example to the equation isn't going to help clear things up about what the effects on value are of physical condition.

 

[CANative]

BTW - it's my understanding that a cost to cure estimate WILL include labor... that may not be typical of what you've found, though.

Cost + EI + Time. It's a reasonable basis for the adjustment. Sometimes I include PDF pages from the CA BOE AH531 cost tables to support the cost. The cost tables include EI.

It's "my estimate of market reaction."

 

[George Hatch]

You guys see flip transactions involving remodels and rehabs all the time. You know the difference in pricing between the before and after isn't limited to the costs.

It'd been years since I taught the M&S cost courses to appraisers, but the last time I looked the costs presented in the residential guides are different than the costs presented for the same types of construction in the commercial editions because in the latter the appraiser is developing the costs of the indirects and profit margins separately, whereas they're all aggregated in the Residential Cost Handbook.

And the 531 publication, too, for that matter. That's why it's important to understand what each 'base' cost does and doesn't include when we're using them.

Everywhere else outside of SFR appraising we develop these factors individually. Read a narrative if you don't believe me.

 

[Terrel L. Shields]

not following?

Maybe I am speaking out of term to say others feel this way, but FNMA/FREDDY, more so that FHA or VA, has their own spin concerning compliance with USPAP. In effect, they prefer to dictate terms to TAF rather than visa versa. Noted back in 99 when we were putting 2 certifications in reports because Fannies was different from the one in USPAP. Interestingly, USPAP now makes it plain the certification does not have to be identical, so they basically caved to Fannie. Fannie Mae introduced such things as the MC form, the UAD codes, etc. That is "Fannieworld" which A - made reports a coded mess that no homeowner in their right mind would attempt to read. ...yet FNMA still insists on Cert 23 and borrowers "relying" upon our reports. Catch 22. How does it fit that we are supposed to write a plain language report that readers can understand, yet use a byzantine maze of codes and forms to express the report. From ordinary text to Q's and C's etc...reduces the fanniespeak form into a convoluted mess. When this all came about, I made the decision to quit doing secondary market, outside of FmHA and SBA backed farm loans. I felt that Fannieworld invites you attempt to interpret rules which are conflicted or at best, questionable. That's my vision of FNMA and the sort of Orwellian Fanniespeak where lies are truths and truths are lies.

 

[alebrewer]

Cost + EI + Time. It's a reasonable basis for the adjustment. Sometimes I include PDF pages from the CA BOE AH531 cost tables to support the cost. The cost tables include EI.

It's "my estimate of market reaction."

So I'd say cost + labor, just because IMO a typical homeowner doesn't factor in EI when estimating CTC. For example, I just had plumbing repairs done, and paid for labor + cost of materials. I'm sure the plumbing company's EI is built in to the labor, but that's not a direct component of the CTC... Not sure if Texas has anything similar to the CA book you mention. Be interesting if they did. I would assume that would serve as fairly good support for the workfile.

 

[CANative]

Mathematical adjustments based on precise figures and models. The adjustment is squishy because it depends on the negotiating skills of the buyer and seller, what's available on that day, and the condition of the market.

Reasonable... not too high / not too low. Who is going to criticize your work if you come up with a logical explanation?

 

[Terrel L. Shields]

flip transactions involving remodels and rehabs all the time.

Most of these were extreme cases of trashed out houses here. The risk was high, it isn't a few boards on the floor and some tiles sized jobs. Yes, they made an EP, but the scope of the repairs were in the tens of thousands of dollars, not a few hundred bucks and some flooring from Lowes

Not sure if Texas has anything similar to the CA book you mention. Be interesting if they did. I would assume that would serve as fairly good support for the workfile.

I use the insurance and renovation cost book from NBC which includes labor.

 

[alebrewer]

Maybe I am speaking out of term to say others feel this way, but FNMA/FREDDY, more so that FHA or VA, has their own spin concerning compliance with USPAP. In effect, they prefer to dictate terms to TAF rather than visa versa. Noted back in 99 when we were putting 2 certifications in reports because Fannies was different from the one in USPAP. Interestingly, USPAP now makes it plain the certification does not have to be identical, so they basically caved to Fannie. Fannie Mae introduced such things as the MC form, the UAD codes, etc. That is "Fannieworld" which A - made reports a coded mess that no homeowner in their right mind would attempt to read. ...yet FNMA still insists on Cert 23 and borrowers "relying" upon our reports. Catch 22. How does it fit that we are supposed to write a plain language report that readers can understand, yet use a byzantine maze of codes and forms to express the report. From ordinary text to Q's and C's etc...reduces the fanniespeak form into a convoluted mess. When this all came about, I made the decision to quit doing secondary market, outside of FmHA and SBA backed farm loans. I felt that Fannieworld invites you attempt to interpret rules which are conflicted or at best, questionable. That's my vision of FNMA and the sort of Orwellian Fanniespeak where lies are truths and truths are lies.

I wouldn't argue that the tail wags the dog, nor that the vast majority of residential assignments fall into the agency's purview. Still don't see how that makes residential appraisers 'underwater'? Do you mean that residential appraisers have caved as well, and that somehow we're not capable of swimming? Sorry - I just don't follow the analogy...