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CA External Functional Depreciation

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ZZGAMAZZ

Thread Starter
Senior Member
Joined
Jul 23, 2007
Professional Status
Certified Residential Appraiser
State
California
Subject is a SFR in the fall zone of a utility tower.

How does one determine the amount of external functional obsolence in the CA? Because SC and CA are developed independently, I'm not sure whether the market reaction determined in the SC approach would be appropriate for the CA.
 

hastalavista

Elite Member
Joined
May 16, 2005
Professional Status
Certified General Appraiser
State
California
Subject is a SFR in the fall zone of a utility tower.

How does one determine the amount of external functional obsolence in the CA? Because SC and CA are developed independently, I'm not sure whether the market reaction determined in the SC approach would be appropriate for the CA.

The fact that they are regarded as independent approaches does not nullify that some analysis for certain aspects of the value problem are based on a single-set of data.

In the CA, how does one get a site value? The preferred method is sales comparables.
How does one determine the functional obsolescence of an appeal aspect such as a floor plan; perfectly functional in the 60's, perhaps not so functional now? By going to the market and extracting from the sales.

I'm not sure whether the market reaction determined in the SC approach would be appropriate for the CA.

For an appeal item like proximity to a high-voltage transmission tower? I don't know how else to measure the impact except for going to the the SCA (except, of course, if you have rental data... then there may be a basis for making the adjustment based on the IA :new_smile-l: ).

Good luck!
 

Randolph Kinney

Elite Member
Joined
Apr 7, 2005
Professional Status
Retired Appraiser
State
North Carolina
Subject is a SFR in the fall zone of a utility tower.

How does one determine the amount of external functional obsolence in the CA? Because SC and CA are developed independently, I'm not sure whether the market reaction determined in the SC approach would be appropriate for the CA.
Hi Greg,

Theoretically, if you can show a market difference in value of a home built in the fall zone versus one that is not, all other variables being equal, then you have your market derived obsolescence. You would apply that obsolescence in the CA.

You would have an external obsolescence which is an element of depreciation; a defect, usually incurable, caused by negative influences outside a site and generally incurable on the part of the owner.

If you cannot show a market difference in value from the location due to the fall zone, then you would be hard press to say how much, if any, dollar amount of should be shown in the CA.
 

CANative

Elite Member
Joined
Jun 18, 2003
Professional Status
Retired Appraiser
State
California
Hard pressed maybe not not impossible. It would be depreciation from incurable obsolesence (external). If you can find a hit in the sca (owners pay less because they don't want to live in a house where a tower could fall on it) then it stands to reason that rental rates would also probably be lower for the same reason. Apply the rent loss to a factor, cap rate, grm, ratio, (whatever) and make a depreciation adjustment in the CA.

Just don't tell Sandy about it.
 

Mike Boyd

Elite Member
Joined
Jan 18, 2002
Professional Status
Retired Appraiser
State
California
The fact that they are regarded as independent approaches does not nullify that some analysis for certain aspects of the value problem are based on a single-set of data.

In the CA, how does one get a site value? The preferred method is sales comparables.
How does one determine the functional obsolescence of an appeal aspect such as a floor plan; perfectly functional in the 60's, perhaps not so functional now? By going to the market and extracting from the sales.



For an appeal item like proximity to a high-voltage transmission tower? I don't know how else to measure the impact except for going to the the SCA (except, of course, if you have rental data... then there may be a basis for making the adjustment based on the IA :new_smile-l: ).

Good luck!


Good response, Denis. I agree with you.
 
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