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Cost Approach ?

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DCraig00

Thread Starter
Freshman Member
Joined
Dec 11, 2007
Professional Status
Appraiser Trainee
State
Massachusetts
When you do not develop the cost approach in your report, are you still to determine a land value? If so, Where in the report must you put the value of the land, in the cost approach section?

Im sorry If this sounds like a dumb question, but I am pretty new- and have only been working in a small office where I dont get many other feed backs on how some appraisers work.
 

CANative

Elite Member
Joined
Jun 18, 2003
Professional Status
Retired Appraiser
State
California
If the client wants this information you need to provide it. Put it anywhere you like. The cost approach section in the FannieForm is as good a place as any and that's where most would put it.

Otherwise, Fannie Mae has changed their selling guide and the requirement for a site value opinion when the CA is not developed is no longer there. FHA never required it. Not sure about Freddie Mac but they're usually one up on Fannie.
 

CURT VAN HOOSER

Senior Member
Joined
Nov 3, 2003
Professional Status
Licensed Appraiser
State
California
I agree with Greg...put it in the "Opinion of Site Value" area in the CA. If you do put it in the CA section, it would be a good idea to lock the "Indicated Value by Cost Approach" field so the value doesn't show up on page 2 and cause confusion for the checklist reviewers looking at the report.
 

CANative

Elite Member
Joined
Jun 18, 2003
Professional Status
Retired Appraiser
State
California
I type "ND" or "Not Dev" in that cell. But you have to watch it because if you change something in the CA section the cell will revert to the land value entered in the top cell.
 

Terrel L. Shields

Elite Member
Gold Supporting Member
Joined
May 2, 2002
Professional Status
Certified General Appraiser
State
Arkansas
The site value probably should be included in every appraisal. The basis for estimating that site value should also be included (ie.-in a self contained a comparable sales land grid, the allocation/abstraction or ground rents capitalization calculations; in a summary at least a statement as to the method used to estimate like comp sales or allocation and reference to the supporting evidence in your workfile.
 

stefan olafson

Senior Member
Joined
Apr 2, 2003
Professional Status
Certified General Appraiser
State
North Dakota
If you place a value of the site in the report be darn sure to also develop your analysis and report how you arrived at that value. USPAP requires it...
 

DCraig00

Thread Starter
Freshman Member
Joined
Dec 11, 2007
Professional Status
Appraiser Trainee
State
Massachusetts
Thank you for all of your kind responces.
I usually do not develop a cost approach unless the lender requires it. I am currently sending out 4 demo appraisals to the MA board of appraisers, I need these reports to be PERFECT. They are deciding on accepting my application according to these demos. Do you think I should add the cost approach in them even though I rarely develop it, and it is not manditory?
 

Howard

Sophomore Member
Joined
Dec 12, 2007
Professional Status
Certified General Appraiser
State
Missouri
Quick survey question:

In developing site value for a cost approach (I'm thinking commercial...but could be residential), how many put up an array of sales showing the range of unit values (could be gross for residential), then pick a number from the range. Factors considered, but not shown in a formal grid. As in...."Range of unit values was from $8 to $10.50 per SF. Subject was most similar to the sales at the bottom end of the range and I selected $8.50 Per SF".

On the other hand, how many develop a comparison grid, with unit values and all adjustments for features of comparison shown? If the latter, does it matter that the CA is now partly a Sales Comparison Approach?

Partly theoretical crapola, I realize, but this topic often gets discussed in the context of developing or reviewing education (we don't get out much), and I'm curious what the general consensus is. I have my suspicions, but I'm curious to see what others actually do.
 

stefan olafson

Senior Member
Joined
Apr 2, 2003
Professional Status
Certified General Appraiser
State
North Dakota
Depending on the type of appraisal I develop both of the examples. For residential I typically list three or more sales with Date Sold, Size, Consideration, Zoning, etc.... I place my value for the site based on these sales. In a commercial appraisal I find vacant land sales of similarly zoned land and provide a detailed comp sale grid for each. Then I sometimes do a grid with adjustments to arrive at a value.

It's really touchy in the world of review appraisers. It really depends on what type of training and where the reviewer got the training to understand what they are looking for.
 

Ross (CO)

Senior Member
Joined
Jan 17, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
Greg,.....I'd like to think that I was adequately aware of any amendment to the Selling Guide.....but I must ask, can you share your reference to this recent "change" whereby the site value estimate might NOT need to be that lone piece of provided information when a full C.A. is not necessary, helpful or supportive in portraying the MV opinion of the subject ?

This site value (only) issue has been hashed around here many times before......especially when the subject is located in an old and mature market where no vacant lot sales have occurred for decades, where no delapidated properties have been sold (and then razed) with a subsequent sale of new improvements (to aid an extraction process) upon that same lot in the months to follow, or when the set of provided sold comparables are within a close proximity to that subject.....and one is proving it to be ludicrous when they go far OUTSIDE of that defined neighborhood or market area to do a hook-and-drag on some other less-similar tract of dirt that sold and which is then hauled over the countryside and back INTO the subject's market.

Rarely could that tactic be representative of a true "site value" calculation while disassociating the location-resources-aesthetics factors which gave that outside lot its unique value identity. If using sold properties from OUTSIDE the defined subject market area is INappropriate, then so too should be any effort to do the same with site sale data. Is it ever o.k. to simply say......Site value estimate can not be adequately determined due to extreme limitations of recent or reliable data. (?)

.....and all of this....when the likely sole reason for a site value estimate is to satisfy a hazard insurance component of securing the transaction, anyway. I thought that insurance skeleton came out of the closet after Nov. 1st of 2005.
 
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