Cost Approach

[Will43]

Do you use the cost approach for condos? If not, how do you address this in the addendum?

 

[Wally Jones]

No.

"The Cost Approach is not applicable to condominiums."

 

[Chris Colston]

"The Cost Approach was not applied as it is not appropriate in multi-unit condominium projects when evaluating a single unit."

Simple statement, like the one above is all you need.

 

[Will43]

Would you consider the report a limited summary report?

 

[Mountain Man]

No, and no. Cost approach is not relevant, therefore no departure is invoked.

 

[Will43]

So, it would be a complete summary. Thank you! I don't get many condos. I really appreciate everyone’s help.

 

[Mountain Man]

Yes, complete summary.
Unless you have some substantial rental income, and are leaving out the income approach.

 

[Will43]

No, there are no rentals.

 

[Dave Smith]

Plus, the cost approach section isn't even on the condo form. Therefore Fannie and Freddie are not even asking or expecting the cost approach to be considered.

A buyer of a condo unit can't possibly go down the street and build an individual condo unit like a single family home buyer could build a house. Therefore the "hypothetical" of the cost approach can't possibly work for a condo unit.

My $0.02 worth.

 

[Mountain Man]

No, there are no rentals.

Cool... easy job. Most I have done do bring in some rental income. So..... you know the UW wants all the rental comps, IO statement, etc. Makes a difference in the fee. :mrgreen: