Determining as-is value of site improvements

[Krystal Schware]

Hello. I am desperately in need of an educated answer. In the cost approach, the "last line" is for the as-is value of the site improvements. Our office is split in half on the correct way to handle this part. Our boss has us enter decks, pools, barns, etc in the empty line below the basement so it appears that would leave the line in question for well, septic, driveway, etc. So, our biggest debate is, do we apply depreciation to this amount? Most of us are under the understanding we should however the owner swears that is not correct and makes us put in the amount without depreciation. My one teacher, back in 2003, said there is a "standard" amount that may be used here. If this is correct, anyone know where I could find it in writing?
Thanks so much in advance for any help. I am really upset about feeling like I am forced to put out appraisals that have an incorrectly completed cost approach.

 

[Mr Rex]

The well pump does depreciate, but the well, theoretically lasts forever. Again, theoretically, the septic system will last indefinetely with routine maintenance. Similarly, gravel drives have to be replenished periodically etc. A little tougher to determine depreciation on a concrete drive . I take the "As Is" to mean just that, account for the depreciation. But given that a well pump and labor to replace it is in the $500 range in my area, its not a biggy. Mileage may vary.

 

[Robert Hronek]

The as is site improvements would be the depreciated value of such improvements though you dont show cost new less depreciation.

 

[Restrain]

This can be depreciated cost, or contributory value. For example, I have routinely put the pool in the site improvements rather than showing cost less depreciation (less questions). However, the depreciated value of the site improvements should relate to the Sales Comparison Approach. For example, if you are giving $10,000 to a barn, the adjustments in the Sales Comparison Approach should relate to that value.

 

[Lax1]

I lump sum the depreciated value of all site improvements on the line at the bottom-as is value of site improvements- pools, driveways, wells, septic, landscaping, walkways, etc.

 

[Couch Potato]

Personally, I would not classify a barn as a "site improvement" any more than I would classify a garage that way. I typically only put things that exist at or below grade level in the category of "site improvement."

 

[xm72mhd]

I am really upset about feeling like I am forced to put out appraisals that have an incorrectly completed cost approach.

It doesn't sound like you are being "forced" to do anything egregious. As you can see there are multiples of methods for handling this question. Most of the relevant discussion revolves around the issue of depreciation. The question calls for "as is" value, which certainly carries with it more than a suggestion that you don't use an un-depreciated value if whatever the stuff you include there is old and worn out.

 

[hastalavista]

In the cost approach, the "last line" is for the as-is value of the site improvements.

So, our biggest debate is, do we apply depreciation to this amount?

(my bold)

"As is" value includes depreciation.


(Ok, this actually hit home to me on a class I took a few months ago. I think the question is an excellent one, Krystal!)

 

[xm72mhd]

(Ok, this actually hit home to me on a class I took a few months ago.

Did it hurt when it hit?

I kno I've had that happen, except I'm getting old enough I can't remember when it happened or how it felt.

 

[hastalavista]

Did it hurt when it hit?

I kno I've had that happen, except I'm getting old enough I can't remember when it happened or how it felt.

Yeah, it really blind-sided me. Greg Boyd was sitting next to me and he ducked, so BAMM!!!! Right upside my head!