Cost Approach In New Construction

[CANative]

Brad Pack was a fierce proponent of the CA and we had some friendly arguments over it until I saw the light in about 2005 or 2006 when Fannie Mae began REQUIRING the cost approach (and required dealer invoices on new construction) for manufactured homes.

The CA is ALWAYS applicable for any improved property. And MV indications is not the only thing it's good for.

 

[Terrel L. Shields]

the appraiser simply parroted the construction cost breakdown from the contractor

That's a very real issue in new poultry barn construction. Most bids do not include the dirt work nor the water system. The dirtwork can run $2 a SF for a building costing $12-15/SF. And the water system in a "normal" six house operation will require 60,000 gallons of back up storage minimum. That's 6 to 12 big plastic tanks, plumbed with variable speed (constant pressure) pumps capable of several gallons per minute. The farm will require two deep wells, or a deep well and rural water. This redundancy can be a life saver for a quarter million birds. Water is necessary not only to drink, but to cool the houses. Without those cool cells and mist valves, the birds could get 100 degrees or hotter which is a death dealing problem. So dirt work can add $80,000 to the cost and the water system could add $100,000 to the cost or about 25% of the total.