Cost Approach and those who "mail it in"

[PropertyEconomics]

Many times I had cost breakdowns handed to me by builders in support of a contract price some buyer agreed to pay them. I sometimes thought they were nuts. But once I had enough evidence to SOLIDLY prove that's what the MARKET was paying,

What the market is paying is price, we are hired to see if price represents value...a builder handing you a cost sheet and then you confirm that the cost sheet equals value because a buyer agreed to pay the price...did you check resales in the community or similar communities? Pendings and listings and how long on the market and price reducations? Most times, builder upgrades and "packages", including absurd lot premiums, do not hold up on resale prices, so clearly the value is not there, even though a buyer signed a contract for that amount.

Builders often have the first few "Sales" to friends/associates/straw buyers to establish the first critical sold comps they know the appraisers will rely on for price.

who the hell was I do disagree?

You are the appraiser, that's who you are, and your job is to "disagree".. By that I mean, your job is to question, and not automatically agree. Re, no matter the sales contract price or cost sheet a buyer signed off on, we do an independent appraisal , with the result that our value opinion may differ from a builder's cost sheet, or sales contract.

If your value opinion supports contract price, fine, if not, as an appraiser, you have to believe in your value opinion as the more credible.

Unsustainable suggests future, not present value. My appraisals were AS OF a specifiic date. With that said, their are boundaries and outliers that should be considered AND REPORTED, which I did and let the lender make the prudent lending decision.

Present prices can be unsustainable as of effective date, if one takes into account what made the prices too high to be sustained, such as favorable in house builder financing, prices inflated to cover the fact that the buyers are not really qualified (Super low down payment, with cash at closing back that becomes down payment, rolled into the price), lack of informed buyers (buyers paying premiums that are not seen as holding value on resale market), and other factors.

JGrant .. you took this post WAY too seriously ... I mean SERIOUSLY!!

 

[Pittsburgh Pete]

J,

Really, Principals and Procedures from the AI, the book comes with the course, along with the dictionary of Real Estate Appraisal. I know it's a 40 hour begining course, but it is well worth the money and will answer most of not just what's in this thread, but many others concerning theroy, technique and methodology.

Okay, that's my one plug for the AI for the next 6 months, so now I can go back to bashing them. Where's Pete?


.

Duly noted!

 

[CANative]

Yes, I agree that we use market data, such as EP/EI to develop the CA value indicator. Whether or not the CA value indicator is market value is up to each appraiser on each report., as the appraiser reconciles it with the other value indicators and decides which of them to weight/rely on for MV opinion.

took a while to answer I was taking a break from posting!

Argggg!!!!

Wait a minute. By this do you mean:

1) That the value indication is not the THE market value you've concluded from other methods; or

2) That the value indication is not market value per the definition?

 

[Pittsburgh Pete]

Argggg!!!!

Wait a minute. By this do you mean:

1) That the value indication is not the THE market value you've concluded from other methods; or

2) That the value indication is not market value per the definition?

This misconception of JGrant's is deeply inbedded and can only be surgically removed.

 

[CANative]

If it's the former I could probably not disagree with her position. If it's the latter then I would agree with you.

 

[JSmith43]

This misconception of JGrant's is deeply inbedded and can only be surgically removed.

Leave it in place & let it serve as a warning beacon to others:icon_mrgreen:

 

[J Grant]

Wait a minute. By this do you mean:

1) That the value indication is not the THE market value you've concluded from other methods; or

This one. And I don't have a misconception, the three approaches are developed independently and then reconciled , and then the appraiser gives their opinon of MV.

PE can make whatever silly statements he wants and then Mentor joins in the chorus, doesn't make either of them right (does make them rude though)

 

[CANative]

Wait a minute. By this do you mean:

1) That the value indication is not the THE market value you've concluded from other methods; or

This one.

I think the others owe you an apology (mitigated by the fact that you didn't communicate very well.)

 

[J Grant]

AKA apology, I am not holding my breath. For supposed "professionals" they sure make some childish posts!
(but thanks for the thought)

 

[CANative]

So you acknowledge that the results of the CA is AN indication of market value (assuming market value is the purpose of appraisal). It's just not THE market value that you have in mind?