Cost Approach In New Construction

[BarrySW1963]

If you don't like using this appraiser, don't continue to use them in future...but why report them to the board since at least per what is posted they did not violate USAP?

Seriously.

 

[NachoPerito]

I appreciate the feedback. We've had other appraisers tell us that market participants would not consider the cost approach in valuing a property with new construction, but still give some sort of cost analysis - whether it's using M&S or comparing the developer's budget to other similar projects that they've appraised recently. I'd like to report the appraiser for this assignment to our state licensing because he was late on completing the assignment, increased his fee after accepting the assignment (he was given the information prior to accepting the assignment), and was very slow to respond to corrections (there were other issues in the report). While he ultimately addressed our concerns, it's taken 2 additional weeks for the review process because of his slow responses. Is this something that we can report?

I don't think these are reportable issues. I think you can never use them again and that is punishment enough. There are worse mistakes to be made that would require being reported to the state. I have seen them.

 

[Michigan CG]

Hold on there now.

.................. It's as if we completely ignore all concepts of handling significant digits just because the book and the app give us those pennies.
.

Sorry, do some reviews and run a Marshall and Swift using their parameters and you will see that what you get and what they get are many times VERY different.

How many appraisers do you think pay for the full Marshall and Swift book and the updates every year? How many appraisers do you think spend $10 PER REPORT to run a Marshall and Swift.

I personally know people who cite Marshall and Swift who have never even seen the book.

As to significant digits you are a little off. When one says they use the source then they report what the source says. One then rounds the results of the approach. The guys who actually use it report it as source reports it from my experience.

 

[Terrel L. Shields]

Failing to even consider the cost approach on new construction isn't a violation of USPAP? Since when?

You comply with Fannie Mae mandates - what we used to call supplemental standards - so why doesn't it apply to banks which are regulated by the Interagency Guidelines...

As required by USPAP, the appraisal must include any approach to value (that is, the cost, income, and sales comparison approaches) that is applicable and necessary to the assignment. Further, the appraiser should disclose the rationale for the omission of a valuation approach. The appraiser must analyze and reconcile the information from the approaches to arrive at the estimated market value.
​

On new construction, your "peers" certainly use the cost approach. It is addressed in 4000.1 and Fannie Mae as well, whether "required" or not.

 

[J Grant]

Where does USPAP state the cost approach must be for new construction?(it doesn't)

 

[J Grant]

4. I developed my opinion of the market value of the real property that is the subject of this report based on the sales comparison approach to value. I have adequate comparable market data to develop a reliable sales comparison approach for this appraisal assignment. I further certify that I considered the cost and income approaches to value but did not develop them, unless otherwise indicated in this report.

This is from the cert page of the URAR. If a client requires cost approach in order, the appraiser should provide it as then it is an assignment condition.

 

[Howard Klahr]

This appraiser flat out refused and required a lot of hand holding to get a somewhat acceptable report.

As a regulated institution, have you considered how your vetting process addresses these concerns for the appraisers on your approved panel?

I'd like to report the appraiser for this assignment to our state licensing

Why is just no longer utilizing their services insufficient? Have you even dropped them from your approved panel?

 

[Terrel L. Shields]

Where does USPAP state the cost approach must be for new construction?(it doesn't)

Yes, it does. It's part of that doing what our peers do and we must be aware of the techniques and methods the industry has used. Elimination of the cost approach simply out of hand is contrary to that required by USPAP. If it wasn't then there would not be a section in it dealing with the ca.

 

[jay trotta]

Not enough facts; a lot of tongue wagging going on, haven't seen the Order Form.

IF the appraiser does not want to comply with the "Order Request", why did you Not move on the next in Line ? It would appear you are in a Business battle - we are Not here to settle Your differences, that is a business decision you make.

CA - it Depends, some do and some don't; On "New Construction", I will provide the CA, because in MO, it provides input for the Client to review and make an informed decision, along with the Other data that is provided. I cannot answer for everyone, only myself and that is my decision.

"I am a reviewer for a federally insured bank"; Are you doing a, USPAP: Standard 3 Review or a non compliant review (administrative) ??

 

[Elliott]

Pugh,
Its SOP to include a Cost Approach, just for giggles I use it with all reports. I don't do review work, but if I were in your position, I'd probably, say, "Well, all appraisers don't say they don't use the Cost Approach, regardless of the weight, so we want a Cost Approach, period. If you want to continue to do work for us, you will include it." The Cost Approach with new construction is absolutely appropriate.