Cost Approach for Townhouse

[Ariba]

This is a STIP I recently received.

COST APPROACH REQUIRED - Please provide the entire CostApproach, including the 'Opinion of Site Value' and 'Estimated RemainingEconomic Life'. This is a CLient Specific Requirement.

When an Interior Inspection has been performed, the completed Cost Approach, including the 'Opinion of Site Value' and 'Estimated Remaining Economic Life', is required by the Client.

Is it even possible to do a credible/reliable cost approach for a attached townhouse built in 1986 without being misleading?

 

[CANative]

Credible, reliable, misleading.

The 3 C's. No the 1 C. With an R and an M.

Of course a credible result can be accomplished. Where is the requirement for reliability and what does that even mean? Misleading in what way?

It's much more difficult to do a townhouse CA and if they didn't give you the opportunity to pass on the assignment up front I would demand additional fees for doing this. Maybe another $150 or more.

 

[Lee Lansford]

This is a STIP I recently received.



Is it even possible to do a credible/reliable cost approach for a attached townhouse built in 1986 without being misleading?

Was this a condition of the assignment that you accepted when you signed-on?!

 

[Ariba]

Was this a condition of the assignment that you accepted when you signed-on?!

The question is, "Is it even possible to do a credible/reliable cost approach for a attached townhouse built in 1986 without being misleading?"

 

[Mr Rex]

The question is, "Is it even possible to do a credible/reliable cost approach for a attached townhouse built in 1986 without being misleading?"

I suspect insurance agents do it regularly.

 

[Ariba]

I suspect insurance agents do it regularly.

Point being? They also do it regularly for condominiums. Do you?

 

[Mr Rex]

The point is the answer to your question is yes, it can be done as it is done regularly. Do I do the Cost Approach on Condos? No, I've never been asked to. I'm sure if asked and the fee was adequate, I could do so. Of course I would have to reveal to the client that I had never done it before and would have to gain the competency to do so.

 

[Lee Lansford]

The question is, "Is it even possible to do a credible/reliable cost approach for a attached townhouse built in 1986 without being misleading?"

If that is your conclusion, decline the assignment.

By the way, I would not be developing a Cost Approach for the subject property and such a request is a whole lot of silliness.

 

[VegasWayne]

Are they from California? I had the same stip on an 80's townhouse in Las Vegas. It was not included in the order and they had received the appraisal about 30 days prior. They threatened me with turning me in to the California Bureau of Real Estate if I didn't provide the cost approach that day for no additional fee. I told them to go for it.

 

[hastalavista]

The question is, "Is it even possible to do a credible/reliable cost approach for a attached townhouse built in 1986 without being misleading?"

My answer is yes.
Your problem isn't the cost approach methodology (it works).
Your problem (and it would be my problem as well) is the quality of the cost data and the ability to accurately estimate the site value of a townhouse-style residence.

The methodology is correct. If you had no other way to value the subject property, the cost approach would be better than a guess or using a Ouija Board.
But you do have another way to value the property (presumably the SCA and the IA would probably work as well).
So, you can complete the cost approach using the correct methodology, but conclude that the data is of poor quality and therefore the results are not given any consideration, and your report and value will not be "non-credible" or "misleading" because the cost approach was included.