Appraisal of condominiums for replacement value?

[Jeff Ward]

I have been asked by an insurance company to appraise several condominium units in a condominium in which several of the units were destroyed by a fire recently. They want a 'current replacement value' on each of the units that were burned down. It seems to me that this is not something they typically use an appraisal for. Has anyone done an appraisal for the replacement value of condominiums? Before I turn this down, I am curious if anyone has done this type of appraisal and how they went about doing it. The condos are townhouse style units.

 

[nstanbru]

I think you need to get a clear definition of what they mean by "current replacement value" to determine your SOW. Are they asking for cost estimates to rebuild the units?

 

[Riick]

They want a 'current replacement value' on each of the units that were burned down

That's replacement value and NOT replacement cost - correct ??
FWIW, I'd interpret that as an estimate of market value prior to the fire(s).
As you know, especially with condos, cost has little or nothing to do with value.

.

 

[Restrain]

I think that what you need is a definition of their definition, and that would be accomplished by talking with the client. They may want a cost approach as opposed to a market value approach, or some combination of both. This is one where good communication now will save you a lot of grief later.

 

[Jeff Ward]

They stated in the engagement letter that "the purpose of the appraisal is to establish the current replacement value of the units in order to determine whether or not the insured is in compliance with the co-insurance clause of the policy." I agree, better communication is needed with the client. I have asked them to be very specific about what they need and so far they have been very vague. I will have to continue to be forceful with them. Filling out an engagement letter should not be this difficult!

 

[Elliott]

Don't know what 'kind' of condo you have, but it would seem reasonable
to go to multi-family construction costs. Of course the problem of
building 4 is only at that cost if you build the 20 or 40 or 200 of them.

 

[Ken B]

If you are valuing the "replacement value of the unit", you first need to determine the boundaries of that unit. I don't expect that those boundaries will include the structural components of the building which would be insured by the condominium association.

 

[Riick]

Interesting -- this may indicate what is going on here,
and a trap for the OP / appraiser
(see COMMENTS on bottom of page)

http://www.condoassociation.com/con...ation-Insurance-Is-Property-Valued-Right.aspx

.

 

[KenAZ]

"Don't hire an appraiser that uses Marshall & Swift MVS books or Commercial Estimator for insurable value estimates: these are not for insurance.

If your appraisal uses the term "new construction", or "replacement cost new" (RCN): it's the wrong type of estimate for insurance purposes."

 

[Mike Boyd]

"Don't hire an appraiser that uses Marshall & Swift MVS books or Commercial Estimator for insurable value estimates: these are not for insurance.

If your appraisal uses the term "new construction", or "replacement cost new" (RCN): it's the wrong type of estimate for insurance purposes."

I agree. Insurance underwriters have their own estimate guides. You can do it with M&S but be very careful and consider every last detail. Also, check with the HOA bi-laws. They might have some very specific requirements for rebuilding.