Cost To Cure, Be Careful Out There

[leasedfee]

Cost to cure are some of the most daunting formulas in this profession. CtC isn't simply the cost of the component.

This is a great example why the cost approach is useless.

Ted Whitmer MAI, JD demonstrates that given the application of five or six input variables, a capitalization rate can range from something like 4% to 12%, about a 3-fold factor, so one person's cap rate isn't another person's cap rate. We haven't even touched upon variations in rents, vacancy, expenses, reserves, or other modeling aspects. Does that make the income approach useless?

In the sales comparison approach there are numerous variables and depending on the comparable set, can vary 2-, 3-, 10-fold. Does that make the sales comparison approach useless?

As all three approaches to value are thus useless, what is your fourth approach to value that is not useless?

 

[ucbruin]

Cost to cure are some of the most daunting formulas in this profession. CtC isn't simply the cost of the component.


Ted Whitmer MAI, JD demonstrates that given the application of five or six input variables, a capitalization rate can range from something like 4% to 12%, about a 3-fold factor, so one person's cap rate isn't another person's cap rate. We haven't even touched upon variations in rents, vacancy, expenses, reserves, or other modeling aspects. Does that make the income approach useless?

In the sales comparison approach there are numerous variables and depending on the comparable set, can vary 2-, 3-, 10-fold. Does that make the sales comparison approach useless?

As all three approaches to value are thus useless, what is your fourth approach to value that is not useless?

Possibly....

 

[ucbruin]

I was there to testify to the construction process and how there were multiple issues during the two years it took to build the house.

This is an interesting answer...

Were you a witness as an appraiser? Or as a contractor?

 

[Terrel L. Shields]

Does anyone calculate cost to cure with a cost book like insurance adjusters use, or Dodge or this one which I use. Has a nice little printout and program (free) to create an estimate and copy and paste into the report. If i can quantify the repair, I can estimate the cost. Insurance repairs include adjustments for location, etc.

 

[Michigan CG]

This is an interesting answer...

Were you a witness as an appraiser?

I appraised the house hypothetically before it was built and did draw inspections. I testified about the construction process as I observed it.

 

[TRESinc]

As all three approaches to value are thus useless, what is your fourth approach to value that is not useless?

 

[bnmappraisal]

Tres...that's funny!

 

[bnmappraisal]

The appraiser is not an expert in the field of building construction and actual costs may vary from those provided. Repair costs and opinions reported herein are subject to future revision based on new repair estimates and evaluations by a licensed building contractor.

I used this today. Thanks Rex

 

[Deleted member 128537]

I was called to testify as an expert witness in a case involving new construction and the hearing was today.

There were many issues during the time the home was being built. A lot of the issues are cosmetic but also included windows that were not properly installed causing water to leak in and other things I would never expect to reach over $20,000.

The expert who testified before me dealt with renovations of homes and used Xactimate. His estimate was $80,000 and another person came up with $106,000. I was shocked at the figures. If asked for a cost to cure I would have refused as the list was very long but I never thought it would be anything close to that.

This is why I DO NOT give a cost to cure when the work is extensive. I simply state this is outside the scope of work. I am not a licensed contractor. I will put it in the report if a professional gives an estimate I can refer to. But otherwise I tell them to forget it. And it is for the reasons you stated. Just NOT WORTH the liability.

 

[Deleted member 128537]

Does anyone calculate cost to cure with a cost book like insurance adjusters use, or Dodge or this one which I use. Has a nice little printout and program (free) to create an estimate and copy and paste into the report. If i can quantify the repair, I can estimate the cost. Insurance repairs include adjustments for location, etc.

Marshall & Swift has something similar. And I use it for basic things. Such as if one window needs replacement, or the roof needs replacement and it's a fairly simple house. It's a very handy book. But let's say an entire house needs new windows. That's what I call extensive bidding, and that's where only a contractor can determine cost. Especially on older windows when who knows if modern windows will fit properly. Will those windows have to be made specifically for opening/ I've found that the cost of remodeling is so incredibly high in my area I just simply don't want to deal with it. And on older homes you just never know what it will entail.

I watch HGTV flipping show. What they get for costs to remodel is so cheap compared to my area, I can hardly believe it.