Cost Approach On A Condominium

[NJ Valuator]

Client is demanding that the cost approach be completed on a condominium owned townhouse? :wacko:

 

[Craig in Oregon]

Seriously?

Have they told you what they expect the result to prove or support?

My guess is someone at their end is on auto pilot and needs a wake up call,
perhaps to the supervisor?

 

[deturner]

If it is similar to a townhouse, you can provide them with the estimated cost of the structure but the site value will be off because the site is not owned under this type of ownership.

They shouldn't need this for the typical insurance purpose because that is usually covered under the condo ownership/fees.

DaveT in NC

 

[Pat Butler]

True condos ownership in our state consists of air. $0.00 for the cost approach.

 

[Fred]

There was a long thread where several supported the reasonableness of doing a not-applicable cost approach at client’s request/demand. This may be the ultimate example.

Pat,
The ownership is always an undivided fee interest in land and/or “easement” along with “air.” The folks who write for the text for the Appraisal Institute say when the subject is not fee simple, one “adjusts” for differences in property rights. :rainfro:

 

[Carnivore]

I am mixing threads here, but It illustrates the points of why

1. Clients Should never have the last say in what you report nor how you report it.

2. This is mixed use zoning. Whats the highest and best use of the subject?

3. Physical Depreciation??

4. Client demands of a comp outside of complex are often ridiculous, but you do it anyway. Why?

5. Land Value, Site value, (does that include the capitalization rate of one uptown parking spot?

6. (Add your own stupid request here)

Imagine this assignment being demanded by a client or its Phone Monkey AMC Agent as a 2055 Exterior with cost approach!!!!

See attached PDF. :rainfro:

 

[Chris Colston]

http://appraisersforum.com/forum/index.php?showtopic=35093

Not sure if will help or make it worse, but here's a recent thread regarding the COST APPROACH and condos. IMNSHO your client is incorrect since you would not be able to give them a land value AND if it is an inside unit, how would you extract the single unit from the whole building. Most condo ownership, even townhouse designed, you only own from paint to paint, that's why they are measured from the inside. What is the value of air space?

If this is really to determine insurance coverage, the owner should have contents and maybe a small hazard policy to recover incase of a fire, the condo association should also have a blanket policy on the entire project.

 

[Carnivore]

Speaking of Condos. I happen to think that many condo assignments are complex and competence is one of the most serious and common violations of USPAP when it comes to this type of work.

Heres an example of how difficult it can get. All of these are under 300K

 

[deturner]

Andrew,

I like these. There is something odd about them. Tax records show 1 lot with 2 units and each one is getting taxed for land value.

DaveT in NC

 

[bradellis]

Steve,

I am assuming that you are referring to the other thread we are in. If so, I take offense at your remark since you said we were being forced to provide a "non-applicable" approach.

That may be your opinion, but it is an opinion and not a fact. Same as my contrary opinion.

This is a different circumstance. It is an attached condo without land. Common elements in these complexes are virtually never sold or rented- so there is no way to value them by any approach. So, in THIS case Frank must demur.

Brad