• Welcome to AppraisersForum.com, the premier online  community for the discussion of real estate appraisal. Register a free account to be able to post and unlock additional forums and features.

Cost Manuals

Status
Not open for further replies.

Hugh Hill

Thread Starter
Sophomore Member
Joined
Apr 21, 2002
Professional Status
Licensed Appraiser
State
Alabama
What is the best cost manual to purchase and easy to use? I've checked Marshall and Swift and they have several different options. Just wanted the forum opinion before I purchased one.

Thanks,
Hugh
 

Bobby Bucks

Elite Member
Joined
Jan 27, 2002
Professional Status
Real Estate Agent or Broker
State
North Dakota
Hugh
I used them for years and didn't renew a couple of years ago. My reason? I quizzed a few local custom builders and they chuckled at their data. That made me decide not to renew. I've often wondered why so many of us feel we're obligated to pay for publications each year when a more accurate source is available from local builders in your market. It might be a deal for a shop with 10 or more appraisers. ...on the subject, here is a link I found which may or may not be helpful for estimating cost.....plus it's gratis

http://www.building-cost.net/
 

Hugh Hill

Thread Starter
Sophomore Member
Joined
Apr 21, 2002
Professional Status
Licensed Appraiser
State
Alabama
Bobby,

Thanks for your help. I will check the link out.

Hugh
 

Austin

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified General Appraiser
State
Virginia
Let me tell you my cost manual story. I got a call once from the local economic development authority to appraise a proposed industrial shell building for a tenant. I told them I didn’t have time to do it, and they said 300 jobs were at stake and they would make it real easy for me. They gave me all of the land sales, all of the leases, and most importantly of all, they had three contractor’s estimates to construct the subject building. I said OK. They just wanted an appraisal to stick in the file.
The contractor’s estimates to construct the same building under the exact same specifications were: $350,000, $450,000 and $575,000. That is a pretty good range. I used Marshall and Swift and came up with $425,000. Here is the moral of the cost manual story: I never use a cost manual unless I already know the approximate answer, but I use the cost manual as a supporting reference. It looks more believable to quote a nationally recognized cost manual than some appraiser’s personal opinion. So, do it both ways and you will come out ahead.
I took the Marshall cost manual course from the guy that assembles the data and got an inside view of how they work. Each cost level they report is the mid point of a bell curve for that quality classification with a range of about 20%. For example, if an average quality class S auto shop building has a cost manual cost of $30 per square foot, the actual range could be $24 to $36 per square foot. Then you have to index and localize it which could add another 15% or more onto either end of the range.
I keep records of actual cost and a record of what point in the manual range actual cost fall into so the next time if I don’t have an actual cost, I know where to start.
This instructor from Marshall told me that they get calls all of the time from clients that have been using their manuals for 20 years asking: “Oh by the way. What are all of those green indexes in the back of the book? The key is proper use classification of the building.
 

rtubbs

Junior Member
Joined
Jan 15, 2002
So, how do folks without the M&S Residential Cost Handbook handle the cost approach on new construction for FHA or Rural Development (Farmer's Home)?
 

Farm Gal

Elite Member
Joined
Jan 14, 2002
Professional Status
Licensed Appraiser
State
Nebraska
Bobby:
Thanks for the link.

It works out pretty darn high for this area, but would ba a good tool in case of argueing a personal insured loss!!!

VERY Interesting freebie!, and real FAST to run through.
 

Austin

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified General Appraiser
State
Virginia
Lee Ann: You are correct. Nice format and easy to use. The cost breakdowns are great. Like Marshall & Swift, once you test it a couple of times and learn to guage the quality levels it is as good as anything I have seen. Makes it easy to extract depreciation too. You can apply it to all of the comps in minutes and get a range of accrued deprecition from all causes.
Now the next question? If you determine the estimated price using the cost approach, would not it be reasonable to assume that the same factors that determined value in the cost approach are the same factors that determine value in the sales comparison approach? Would that not logically indicate that the correct sequence of adjustments should be to solve for physical differences first before even considering anything else that might affect value? For example, if one comparable sales has an apparent superior location, would not that show up as a residual after all physical differences have been accounted for?
If all of the above are true, would not lease sum of the squares regression be the ideal tool for use in the sales comparison approach? Basically this means working the cost approach backwards using the same theory in both approaches.
 

Farm Gal

Elite Member
Joined
Jan 14, 2002
Professional Status
Licensed Appraiser
State
Nebraska
You are correct. Nice format and easy to use.
Austin You said it better in less words :lol:

Would that not logically indicate that the correct sequence of adjustments should be to solve for physical differences first before even considering anything else that might affect value? For example, if one comparable sales has an apparent superior location, would not that show up as a residual after all physical differences have been accounted for?
It is this very matter of working the "two" approaches that has always bothered me from day 1 of my first residential class... They are two sides of the same coin!

The other issue is that fat 10-30% premium for 'condition and aesthetics' which along witht eh general 'design warm fuzzy' that is pretty hard to quantify!

I have to agree that least sum of squares regression does seem to fit this type of analysis... (even if it is a little convoluted in terms of method... getting a solid replacement cost for your comps IS a better start than guessing).

It is just terribly difficult to get good enough data to crunch enough numbers to get statistiscally supportable results. When you have insufficient data with wide varience as to have HUGE degrees of freedom how much reliance can you place on the results? Again in my area the bazillions (technical term) of sub-nighborhoods gets out of hand fast, and despite my best efforsts I am still pretty dependant on the realtors (who after all do set most local prices...) opinions as to value differences between the areas! Circular, man!

From this type of FAST database you can develop a logic system to some extent, but then you are still dependant on third party data from proven (mostly) unreliable sources!
:roll:
 

Austin

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified General Appraiser
State
Virginia
Lee Ann: The beauty of regression is that you can view and verify the results. You can do the same with the present marketing grid but not enough sales are involved. The last step in the regressuin process is to graph the GLA vs the adjusted prices. If you have the best 25 comparable sales and the graph shows a good pattern, what more assurance could you ask for. If anything is out of kilter you can spot it and go find out why. You can't start out with the assumption that "I know this area has a superior location, or I know how much a pool contributes." If it does or doesn't contribute, the data graph will show it.
The main reason that AVM and tax models are not accurate is that they plug in a bunch of variables assuming they influence value. You can't assume anything. You have to test variables and see what effect they have one variable at the time. There are many things that influence price, but until you have equalized the sales to a common denominator or make them physically equal you don't have any reason to suspect what or how much. It is a system of separting fact from fiction.
Having said all of that, I hardly ever use regression anymore because I have learned an easier way based on what I learned playing with regression. That is, solve for physical differences first and 99% of the time the problem is solved. There is no reason to make any more adjustments. If you pick your comps correctly, everything you need to know is right in front of you. You don't have to import data. It is all in the sequence of adjustments. Try it, you will like it. Don't waste time looking for things until you suspect they are lost.
 

George Hatch

Elite Member
Gold Supporting Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
California
Austin,

I'd like to congratulate you on using your regression analysis experience to find out that which you should have already known. Most of the legitimate adjustments we make are for quantifiable physical differences. Adjustments for location, design/appeal and quality are adjustments that most appraisers strive to avoid by using comparable sales that are similar in those regards. For instance, if I am appraising a 2,000 SF home and have the choice between a 1,700 SF home in the same neighborhood and a 2,000 SF home in a different neighborhood, I always go for the local comparable. I don't want to have to adjust for location. It's not because it is too much work, but because making subjective adjustments is where the questions on objectivity (rightfully) arise.

It looks like you've made your way, full circle, to the most recognized and most commonly used methodology. A couple (and yes, 25 is better) recent sales of model matches, when available, almost always represent the best indication of value. Which is good, since that's how the buyers and sellers work.

George Hatch
 
Status
Not open for further replies.
Find a Real Estate Appraiser - Enter Zip Code

Copyright © 2000-, AppraisersForum.com, All Rights Reserved
AppraisersForum.com is proudly hosted by the folks at
AppraiserSites.com
Top

AdBlock Detected

We get it, advertisements are annoying!

Sure, ad-blocking software does a great job at blocking ads, but it also blocks useful features of our website. For the best site experience please disable your AdBlocker.

I've Disabled AdBlock
No Thanks