Cost Approach and those who "mail it in"

[PropertyEconomics]

For all you Cost Approach honks, please explain how you PROVE physical depreciation on a 25+ year old house? Remember, I said PROVE, as in substantiate it with FACTS, not some "backed into" guesstimate.

Also please explain how you PROVE site value when the proeprty is in an urban location that has been 100% built up for over 50 years and there have been zero comparable vacant site sales in over 20 years.

Like I said, in MOST cases of a single family appraisal report, the Cost Approach is a meaningless number because some value component has been "backed into" and NOBODY relies upon it to anyway make a purchase decision. Therefore, it is useless and precisely why FNMA does not require it unless it is new construction or never been lived in.

For you guys that THINK you are so smart and want to prove it by spend a few hours doing a "proper" Cost Approach, knock yourself out. I'll go ahead and complete two or three reports and bank about $1,000 that day.

And please don't throw that "you dont know what your doing" either as I have been appraising for 30+ years with EXACTLY one failed appraisal report over that time period and that was caused by erroneous data that I relied upon that EVERY other appraiser also relied upon in my area.

And BTW if your an "Appraisal Forum Addict" you need to get more work AND more life. There is nothing more BORING and LAME than real estate appraisers with too much time on their hands arguing about appraisal standards and practices and opinions.

Remember, those that can do good quality appraisal work do it (and get paid really well), and those that can't either review, teach or talk about appraisal work in forums like this one.

I must ask what the hell you are doing here then? Would hate to think you are BORED!!

Three appraisals a day in this market with the necessary reporting requirements for a summary report? SERIOUSLY ....

I think we now have our answer.

Good luck to you.

 

[JamesRockford]

Three appraisals a day in this market with the necessary reporting requirements for a summary report? SERIOUSLY ....

I think we now have our answer. Good luck to you.

Yes, those of you that have the free time to post tens of THOUSANDS of posts in this forum alone HAVE your answer.

I work harder AND smarter than you and never whine and complain about not getting "full fees" and opine that all the AMCs suck.

Look at it this way, I'm getting paid for work YOU (and folks like you) are too lazy to do (or not for THAT low a fee) and my bank account shows it.

Thank you for the opportunity because if everyone worked as hard and smart as me, I would have less work and less money.

OK, I've had enough fun with all you "thinkers", I need to return to being a "doer" and get that third report delivered today.

 

[CANative]

By "working smart" I'm assuming you have lots of "helpers."

 

[PropertyEconomics]

By "working smart" I'm assuming you have lots of "helpers."

Now youve gone and done it ... let out the "industry secrets" of success. Kinda like running an individual AMC isnt it ... charge x, keep y and pay your "helpers" less than z???

 

[DMZwerg]

Look at it this way, I'm getting paid for work YOU (and folks like you) are too lazy to do (or not for THAT low a fee) and my bank account shows it.

Given I get the calls on the orders your clone up here is too "lazy" to touch I wouldn't be that quick to call other appraisers "lazy" if I were you ... my mentor and I considered the cherry-picking cookie-crunchers to be the "lazy" appraisers since practically any apprentice could phone one of those in and never get called on it. In other words putting in 60 hrs per week turning in the same appraisal over & over again (with just a few details changed) does not make you industrious or superior, just efficient and LUCKY as that supposed mountain you are sitting on can crumble away any time and I have seen it happen to a few local appraisers (one of which would likely have made you look like a slacker ... he claimed an average report time of 45 minutes per, and I was able to tell him most of the tricks he used to do it).

 

[KenAZ]

Ken,

No one said that MS was the end all of the cost approach. I have worked for several builders and have kept up with their costs/charges and profit requirements, plus I track new spec home sales. But that's not so hard in my area as it is not fully developed and we have more than enough available land, so land sales are not usually an issue either. It's also very easy to call and/or email photos over and discuss rough estimates for costs to cure, all of this makes the cost approach relevant, and when you do a lot of new construction, both commercial and residential, you have the cost estimates for each project which helps you build a database that you use to compare with M&S.

The cost approach is relevant, especially when considering the highest and best use as improved. Because, that is not a check box answer and requires the consideration of the cost approach. Even with plenty available land, we still raze some to rebuild on the land. Terrel makes a very good point, one that we saw during the subprimes, some 20 year old homes were listed for sale for higher prices than new construction, and that is why you must always consider the cost approach in residential work, because it is relevant.

But to say that unless a building is new, the cost approach is not relevant, that is just plain wrong. Especially when considering special use buildings like gas stations and churches and agricultural properties. Blanket statments about applicability or relevance of any approach to value should always be avoided.

.

Actually I was only referring to Residential, not commercial. In commercial, sometime the CA is all you have and is actually the most reliable indicator of value.

I do not buy the argument that the CA would have saved the market when prices were increasing dramatically. Since it is considered acceptable practice to back into the land value, all of that depreciation would have been attributed to land value. You are correct in saying that old houses should not have been selling for more than new houses. That is a problem with the Sales Comparison Approach and the Principle of Substitution should have been applied.

I still have not seen an appraiser here that supports the CA as a viable approach in residential appraisals ALSO state that they spend 1 to 1.5 hours doing one for each appraisal. My point being that if you are not spending over 1 hour on the CA, you are not doing a CA, you are doing some sort of form filling copied from some cost handbook.

I know that many spend much time and effort in here trying to support all of the different types of obsolecence in the CA, plus the land value (All obtained from sales, not costs), but it comes back to the old "Garbage in - Garbage out" saying.

How can you state that your CA is reliable when the very basis for most of your CA is flawed and based on some cost handbook and not on actual costs? (Garbage In) And then to make things more murky, you apply the Sales Comparison approach to determine depreciation and Obsolescence and land value? So you have a flawed cost new, and a completely different approach used to apply large "Adjustments" to the CA. (Garbage Out)

I used to be in the position of thinking that the CA was effective. I used to argue and laugh at those that tried to tell me it was useless. It was not until I got a job doing the CA that I came to realize how useless, flawed and unreliable the CA that residental appraisers use on the 1004. No one here has stated any argument for the CA that I have not used or seen before, and all of the arguments for the CA are flawed. This is because it is not typically used properly, and when it actuall is used properly (I have never seen it done properly), it is only accurate for replacement cost new. If you want to later apply land values, depreciation (Very flawed) or obsolescense, then stop calling it a CA and name it as a Sales Comparison Approach/CA hybrid.

 

[JSmith43]

The new guy left about the same impression as would Larry the Cable Guy, if he mugged and then impersonated The Phantom of the Opera!

He made a surprise debut performance, but the audience mostly wonders when the chandelier he is dangling from will detach from the ceiling under the weight.:icon_mrgreen:

Maybe Doc Manhattan has an alter ego with a new account?

Appraising 2-3 AMC offerings a day....his name is James Rockford......if the state comes a calling they will be asking for The Rockford Files

 

[Elliott]

I guess James R showed us, its all about the Benjamins. But if he keeps up his pace of 9 posts per day,
he'll be one those lazy 32K Posters in 10 years.

 

[JSmith43]

I guess James R showed us, its all about the Benjamins. But if he keeps up his pace of 9 posts per day,
he'll be one those lazy 32K Posters in 10 years.

9 Posts today? With the considerable intellectual contribution he must be exhausted. Probably only 2 appraisals get written up Wednesday. Expensive $200 lesson:new_smile-l:

 

[DTB]

Now youve gone and done it ... let out the "industry secrets" of success. Kinda like running an individual AMC isnt it ... charge x, keep y and pay your "helpers" less than z???

I've never heard of any successful business charging zzz and paying out zzz+, have you. Sheesh some guys will argue anything.

You must have been one of those employees complaining about how the boss is getting rich off of us.