Cost Approach vs Value Opinion

[ucbruin]

Two weeks ago I based my opinion of value on the Cost Approach and pretty much ignored the SCA.

Commercial or residential assignment?

 

[hastalavista]

Do you complete the Cost Approach before you complete the Sales Comparison Approach?

Not always, but many times, yes.

 

[Michigan CG]

Commercial or residential assignment?

Residential.

 

[J Grant]

HBU questions if improvement contributes more to land than if land were vacant. If a builder builds a new home and can't recoup his costs, that was a risk he took. Just because a builder loses money on a house ( economic ext obs ), if improvement of house adds more value to land than if vacant, the HBU is "as improved" (res use with existing house)

 

[ucbruin]

Residential.

That must have been an "interesting" assignment.

 

[Michigan CG]

HBU questions if improvement contributes more to land than if land were vacant. If a builder builds a new home and can't recoup his costs, that was a risk he took. Just because a builder loses money on a house ( economic ext obs ), if improvement of house adds more value to land than if vacant, the HBU is "as improved" (res use with existing house)

Uggghhhh.

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[J Grant]

Can you write an intelligent or at least coherent response rather than uggggggh like a 5 year old?

 

[J Grant]

The queston on res lending reports is , "IS HBU of subject property as improved (or subject to plans and specs) present use, or other?"

The question is not whether a builder will lose money if he builds a house or if he lost money on the house he built. If the house adds more value to site than if site were vacant, the HUB is present use.

 

[Lee Lansford]

...

...If the house adds more value to site than if site were vacant, the HUB is present use.

...though the improvements may not necessarily be the optimum use of the site.

 

[Michigan CG]

The queston on res lending reports is , "IS HBU as improved present use, or other?"

The question is not whether a builder will lose money if he builds a house or if he lost money on the house he built. If the house adds more value to site than if site were vacant, the HUB is present use.

You are supposed to analyze a property as vacant and as improved. It is only then that you answer the question on the form. Just because an existing structure is built does not mean it should be built.

If you are appraising a proposed home, under a hypothetical condition that it is built do you just check the YES box and move on or do you look at all four components of Highest and Best Use?