Cost Approach and those who "mail it in"

[CANative]

I've been fascinated and obsessed with the cost approach since 2005. For many residential appraisers I would guess that most think it is just a simple simon exercise that takes only a few minutes and has no real meaning. Nothing could be further from the truth. It's probably the hardest approach among the three and by the time you're done you have an almost intimate knowledge of the property under appraisal and the market in which it's located.

I've taken many of the general appraiser income (and HBU) classes offered by the AI. All were the 4 or 5 day versions. Good stuff. Over the last year my job has made learning income cap a necessity and I've learned a lot of practical information. IMO, the income approach is the easiest of the three approaches.

 

[J Grant]

CanNative, you should give us all an online course!

Do you use reproduction or replacement cost?

 

[CANative]

Replacement cost. So far. In many cases it's a difference without a distinction.

 

[J Grant]

Thanks, CA. Incognito, that course sounds good...

 

[incognito]

Do you use reproduction or replacement cost?

FWIW, M&S is strictly a REPLACEMENT cost guide. If you Solely use M&S, you use replacement cost. I love it when I read appraisals (I choose not to "Review" appraisals for fee), and the cost approach reads "reproduction cost" and the sole source is M&S...

But it is an interesting distinction. If you use reproduction cost, the issue and process of quantifying functional obsolescence usually becomes much more difficult.

How much are those extinct Brazilian hardwood wall studs or 24k gold plated faucets in that 1200 sq.ft. ranch really worth?

 

[CANative]

What do you do about the CA in a market that pays a premium for a genuine 1931 Craftsman cottage with all original, built in redwood shelves, lots of gingerbread and original wavy glass?

 

[Lost Cause]

What do you do about the CA in a market that pays a premium for a genuine 1931 Craftsman cottage with all original, built in redwood shelves, lots of gingerbread and original wavy glass?

I love that wavy old glass. Of course that glass wasn't wavy when it was first installed...

 

[CANative]

I thought the wavy glass was the result of imperfect glass production a long time ago. My office and my house have "wavy" glass.

 

[Lost Cause]

Weird, But True

My understanding of it was that glass is not a solid, but rather a liquid, albeit an extremely viscous liquid. Over time, it very slowly flows down, causing those waves. In addition, you'll find old panes of glass tend to be thicker at the bottom.

Research indicates that this is a myth, however. Wait'll I get ahold of that high-school teacher! Actually, he's probably passed on considering how long ago that was. Serves him right for perpetuating that myth!

 

[incognito]

What do you do about the CA in a market that pays a premium for a genuine 1931 Craftsman cottage with all original, built in redwood shelves, lots of gingerbread and original wavy glass?

I can tell you what I don't do: An M&S Replacement cost analysis! (Unless you are an advocate of positive functional; I WON'T go there though) Looks like a difficult Reproduction cost analysis, with presumably little functional (unless I detect that those windows are fake!)

There is a "fake" old looking window aftermarket out there, you know! Look for small bubbles in the real ones...

It is a topic well covered in the "Historic Homes" seminar, by the same provider I previously mentioned!