Cost Approach In New Construction

[BarrySW1963]

And how do you gentlemen approach interpolation which is an accepted methodology in utilizing the cost service which you reference?

Oooooo, good one!

Swiftestimator (M&S, either software version) lets you pick one of 6 quality levels, but quality level 3 is often too basic, and quality level 4 (different order than UAD) is often too much. You can add custom components, but that isn't as accurate as getting the baseline closer from the get go. I'd often like to run it at both levels, then interpolate or average them (depending on whether the subject is really closer to a 3 or to a 4), but that seems like it's going to ruffle a lot of feathers on the reviewer front.

What say ye?

 

[Tim Hicks (Texas)]

If needed, in the comments. Just like commenting on the appropriate multipliers.

 

[Michigan CG]

And how do you gentlemen approach interpolation which is an accepted methodology in utilizing the cost service which you reference?

The people who actually go through such an exercise will most likely explain it in the report.

 

[Howard Klahr]

So the issue is not what is entered in the space on the form but what is addressed in the commentary regarding the analysis? If that is so, then is it not about inserting a specific number listed in some reported source but rather conveying what was done and how it was arrived?

 

[Michigan CG]

Typically the residential cost section state that the source of the information is Marshall and Swift and it is typical (if one actually uses it) to put in the estimate by Marshall and Swift and also the quality and condition ratings. The reader should be able to replicate where the numbers come from. If the appraiser delves deeper than most into the approach then it is likely that the appraiser would comment on that.

 

[Howard Klahr]

While I understand that most residential appraisals "typically" reflect the information reported by M&S verbatim, to do so would be incorrect methodology as well. A properly developed cost approach contains other items than just the "hard cost" reported by M&S and need to be incorporated into the analysis too. Where has this been factored in to the analysis and the reporting?

 

[Michigan CG]

While I understand that most residential appraisals "typically" reflect the information reported by M&S verbatim, to do so would be incorrect methodology as well. A properly developed cost approach contains other items than just the "hard cost" reported by M&S and need to be incorporated into the analysis too. Where has this been factored in to the analysis and the reporting?

Mention EI or EP to many appraisers and you will be met with a deer in the headlights stare.

 

[Howard Klahr]

So are you suggesting that I should refrain from mentioning "Soft Costs" at all costs? Couldn't resist the pun

 

[Michael S]

And how do you gentlemen approach interpolation which is an accepted methodology in utilizing the cost service which you reference?

If I decide that the quality is average to good I'll plug in a formula to calculate the average of those two figures and use that as my base cost. For instance Average Class D Office is $103.31/SF and Good Class D Office is $145.98. The average would be $138.145. On rare occasions I've picked a round number between the two and explained it. For the wall height and floor area perimeter multipliers I'll usually pick the closest number from the tables but sometimes I'll take an average of the two or four closest numbers if it falls closer to the middle. i.e a perimeter of 275 LF I'll use an average of 250 and 300 LF. If it's 288 LF I'll just use the 300 LF number. Site improvement costs, indirect costs, and entrepreneurial incentive all have a separate line and depending on the scope of the report may get a few words or a paragraph or two each.

 

[Michigan CG]

So are you suggesting that I should refrain from mentioning "Soft Costs" at all costs? Couldn't resist the pun

Unless you want to see spinning heads that would be something to avoid "at all costs".