Sales Comparison Grid & Cost to Cure

[J Grant]

tereel you have a reading problem

I have said numerous times that a straight cost can be used as an adjustment in th eSCA grid- providing it approximates the market reaction of the contributory value since it is a SALES grid.

You keep insisting I did not say that, then mix it in with anecdotes about developing an income approach, war stories from your career and so on. However, you won't acknowledge that adjustments in te SC are supposed to approximate the market reaction in a sales transactions, and you heap scorn on any appraiser who is able do so , as guessing.

Nothing left for me to say on the topic.

 

[Zoe]

JGrant just don't like mixing cost and sales or income cap. Evidently she relies solely on SC approach.

 

[J Grant]

JGrant just don't like mixing cost and sales or income cap. Evidently she relies solely on SC approach.

You are mixing developing and using an income approach or a cost approach with the topic, which was one thing, putting an adjustment based on strict cost on the SCA grid. I am not going to respond to any more of this nonsense from you

PS I developed a cost approach in every appraisal and use an income approach as well where appropriate.

 

[The Bob]

Good Afternoon -

I am working on a revision for a lender who will not accept a subject-to appraisal report (assignment condition). The subject's roof is in the middle of being replaced (tiles are stacked ready to be installed). I based the value opinion on the extraordinary assumption that the roof replacement was completed in a timely and professional manner in accordance with local customs and regulations. The lender asked me to revise the report because they won't accept an extraordinary assumption - it bases value on a future condition so they won't allow it.

They are insisting I put a cost to cure adjustment in the sales grid - which seems highly irregular. Adjustments in the sales comparison approach are supposed to be based on measurable / quantifiable differences in attributes. Adding cost items to the sales grid seems inappropriate.

Has anyone come across this issue? Is it acceptable practice to use cost derived adjustments in the sales comparison grid?

Thanks in advance for your help -

With a one-off item like that buyers will usually look at the cost to cure. I've seen a number of listings with verbiage like "seller's will provide $2500 carpet allowance". Chances are if the item can be addressed for a known cost, that WILL reflect the market's reaction.
So in your case, the cost to cure is probably very close to the market's reaction.

I've also used depreciated cost to estimate contributory value for items that are typical of the market.

 

[J Grant]

With a one-off item like that buyers will usually look at the cost to cure. I've seen a number of listings with verbiage like "seller's will provide $2500 carpet allowance". Chances are if the item can be addressed for a known cost, that WILL reflect the market's reaction.
So in your case, the cost to cure is probably very close to the market's reaction.

I've also used depreciated cost to estimate contributory value for items that are typical of the market.

I agree, I've said numerous times in this thread that for a very minor amount, like $2500 for a carpet the C2C is likely to be the market reaction, it typically starts to diverges with higher amounts and more severe repair issues.

 

[Terrel L. Shields]

providing it approximates the market reaction of the contributory value since it is a SALES grid.

And you cannot always "approximate" that market reaction with 'sales' data. With paired sales, the range of indicated values can be quit large. Even using sensitivity analysis, we have a number. It is SUPPORT for our adjustment. Is it 100% accurate and true? Not necessarily.

Look at one of the tenants of our profession regarding the adjustment for square footage being exactly the same for all comps. That adjustment is applied to all the sales. Is that genuinely the only option? Why cannot the SF adjustment vary from one comp to the other? For it to be true, you have to assume that all the other factors have been equalized.

Even in board hearings I see them argue that an adjustment is needed for differences in lot sizes. Yet personally, I've seen many lots sell for identical prices that varied somewhat in size. How do you "adjust" for lot size when the market is oblivious to it? Do I care if my lot is 15,000 SF and my neighbor's has 18,000 SF? Who bases their buying decision on a lot sale on size? Now when talking about 80 acres - different metric

U developed a cost approach in every appraisal and use an income approach as well where appropriate.

One of my old mentors said he was never comfortable using only one approach to value except for vacant land.

I've seen a number of listings with verbiage like "seller's will provide $2500 carpet allowance". Chances are if the item can be addressed for a known cost, that WILL reflect the market's reaction.

Very good point.

 

[J Grant]

I meant to write I develop a cost approach on every appraisal and an income approach when needed.(it came out U)

Why do you insist on missing in the approaches to value or other adjustments such as SF with the topic? Running out of things to argue about, I suppose.
The point of applying adjustments is to narrow the value range of the comps.

 

[sputnam]

Again,, reporting or appraisal
the OP's client asked them to ADD an adjustment that was not there before !! They then told the appraiser to base it on cost 1) The adjustment did not exist before.. 2) An adjustment can change the value That is appraisal. Moving the cost adjustment up or down a line on the grid is reporting,.

I clearly said... 'reporting'

 

[TekJ42]

UPDATE

I received a reply from this QE instructor:

Paul Lorenzen
MAI, CPM, CSM, CCIM (Retired)
AQB Certified USPAP Instructor

He indicated that it is acceptable to use cost based adjustments in the sales grid as long as the adjustment includes entrepreneurial incentive (obtained via Market Participant Interview or Contingent Value Method). Apparently the addition of the entrepreneurial incentive component conveys 'market derived' status to the adjustment. He included a sample spreadsheet in his reply to provide an example, along with a thorough explanation. I think he assumed I was asking about a fix & flip assignment, but the as-is portion of his explanation seems to address the original issue (cost adjustments in sales grid).

Thanks again to everyone who replied -

 

[George Hatch]

We already told you that in this thread. Several times.