Cost Approach Wording

[Joshua Fookes]

I've been sending the wording illustrated in this link for the past few months whenever someone asks for a meaningless Cost Approach.

I've not had a single complaint about the wording.

Not even about the report may not be allowed by FNMA. DO THEY EVEN READ THE REPORT???

But, I wanted yall to read it and see if there was anything that might get me in trouble (wording wise).

http://www.measurehomes.com/Costapproachwording.jpg

Josh

 

[CANative]

I think there are major problems with that verbiage. For one thing you're not allowed to produce assignment results that are not credible. Not reliable is another issue, but I wouldn't state the the result is not worthy of belief.

Also, even when working with the most difficult of cost approaches, you should be able to summarize the data and calculations to the point where someone on the other end could reconstruct it.

There's a better chunk of verbiage for this issue and it was published on the LIA website.

 

[Joshua Fookes]

Link???

Josh

 

[Otis Key]

You might want to check out this: http://liability.com/claim_detail.asp?ClaimID=96

 

[Smokey Bear]

I've been thinking of making the lender sign a disclaimer/hold harmless/indemnity agreement when they insist on the cost approach even though it's meaningless.

They would sign saying they are not using it for any purpose other than lending purposes (not insurance) that if they DO use it for an unauthorized purpose, they assume all liability for using it for other purposes, that they indemnify me if they use it for any unintended purposes etc. I wonder if that would make them slither away and find another way to get insurable value. I'm tired of all the added liability for things that have nothing to do with appraised value.

 

[CANative]

http://www.liability.com/claim_detail.asp?ClaimID=96

 

[Mister Ed]

My cost approach discussion in the Supplemental...

Josh,

I have attached this pdf of the boilerplate that is in my reports concerning the CA. I do adjust it for each case as appropriate. I got part of it from the New Fannie Form Addenda project that was a conglomeration of work from a number of sources on this forum as well as some other stuff from some other sources. It has been made as market specific as possible for boilerplate and gets adjusted for anything outside of my primary market area.


I hope this helps and is welcome to any and all to use as well as open to suggestions for strengthening.


-ed-


PS... I do use comments from the link provided by others and have that information saved in a MS Word document.


PPS... Concerning my comment concerning the additional fee for the CA to be filled out if requested after delivery of the report: If the order does not state that the CA is required, I ALWAYS contact (via email) the client to verify their need. I explain our approach as similarly described in the addendum and have them let me know what they want/need. The email is then printed and placed in the workfile. I like it in writing so there is not "he said/she said" stuff going on....

 

[CANative]

Ed... Your verbiage also has some nits that could be picked.

I'm sure the forum nitpicker will be along as soon as his nap is over.

 

[Mister Ed]

Greg,

I am sure it does... That is why I said that it is open for suggestions for improvement. I learned from other people's mistakes about not posting anything here that I am not willing to have picked apart.

I don't know if we can make it bullet proof, but kevlar works much better than cheap plastic... and I want it closer to kevlar.

-ed-

 

[Webbed Feet]

Mr. Fookes,

I would consider other wording if I were you.

Barry Dayton