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Determining as-is value of site improvements

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Krystal,

The reason the cost approach asks for the 'contributory' value of site improvements is because they generally depreciate faster than the main structure(s).

Things like landscaping, concrete walks/driveways, fences, irrigation systems, docks, decks, boathouses and especially POOLS are generally broken out at their 'contributory' value, meaning the depreciation is already taken into consideration. It's NOT just about physical depreciation, e.g., while a pool may COST $60,000 it may only contribute $35,000 which is functional depreciation, not physical.

I sometimes will put an 'outbuilding' in the site improvements, but it depends on what kind of structure we're talking about. If it's a major contribution, I'll put in the area above and depreciate it at the same rate with the other major structures.

If it's a pole barn or large shed that's pretty old, I just include it in the overall site improvement contribution.

Either way, just explain what you did and why in your report.

Sorry, but I don't think there is really any right or wrong answer on this one, but I would disagree with your teacher that there is always a 'standard amount' for site improvements.

So are you now more confused than ever?
 
I agree with Joyce. In addition, improvements such as grading, landscaping, fences, gutters, paving, drainage and irrigation systems, walks, and other physical enhancements to the land that are not part of the building or structure.
 
There are some standard items on the site improvements that are part of the improvement cost new and will be calculated when you do cost approach on the improvement. Look at any new construction cost break down. There are items that they call it standard meaning they come with the construction no matter if the buyer wants them or not. If you buy that house, you are going to pay for all standard interior and exterior items. Standard items are minimum essential item of any residential home. If a home has a garage, it needs a driveway. It doesn’t matter what kind of driveway, concrete, gravel or asphalt, but there has to be a driveway. If there is an entry door to the house, there has to be a walkway to the door from the street, no matter if it is concrete, gravel or tile. You just don’t walk from dirt to the house. There is always a small walkway at the front of house even if it is only 1 ft X 1 ft. If there is back door to the backyard, there must be a patio, no matter how small. It could be 1 ft x 1 ft concrete or just 1 tile but you just don’t step out to the dirt when you open the back sliding door. I think there has to be some sort of front landscaping and also site grading. These are all part of the house improvement costs no matter how small and inexpensive or expensive they are.
The rest of site improvements like landscaping, hardscaping, pool, covered patio, porch are not part of building improvements, they are optional improvements and have contributory values and their depreciations should not be measured by the building costs because they haven’t been part of building cost.
 
If a home has a garage, it needs a driveway.
If there is an entry door to the house, there has to be a walkway to the door from the street
If there is back door to the backyard, there must be a patio
These are all part of the house improvement costs no matter how small and inexpensive or expensive they are.

While I think I understand your point, if you could provide just bit of clarification on few points.

1) Is your point that in the cost approach when you calculate the cost new for the garage that the cost of the driveway is included in the improvement cost or that the driveway is in the as is value for the site improvements?

2) Your point about the walkway and patio might be appropriate in metro areas in California, however, I have seen homes that do not have front walkways or rear patios, none, not a concrete pad nothing. Yes your comments do reflect a generalization, but exceptions do exist that do not necessarily reflect functional obsolescence.
 
Howard,
I agree that there is always exception on the housing standards and codes. If the local housing standard is an improved driveway for a detached or attached car garage, the cost of that driveway improvement is included in the cost of improvement of that garage. If the builder constructs a garage without an access, that garage has no functional utility. The house doesn’t have to have a garage but if it has a garage, it has to be accessible and if the local norm is a concrete, gravel, or compact dirt driveway to the garage, then that is the standard and when the garage is built, that driveway comes with that. It is like a floor covering. Every house comes with some sort of floor covering. The builder can sell a house with a sub floor but it is incomplete house. Sub floors have to be covered with something for the house to be full functional. My point is whatever is a standard access to the garage; it is included in building a garage at the time of construction.
Regarding the entry and the back exist, I have seen as small as a shoe box concrete at the front or rear on new homes when the builder includes standard items. The little shoebox size concrete on the rear where the exit door opens is called patio. The owner may expand it to a large slab or cover patio or order the builder to build a different one but those small patios and porches come with the cost new of the improvements.
 
whatever is a standard access to the garage; it is included in building a garage at the time of construction.

Moh,

My question relates to the theme of this thread, when performing cost approach analysis on the 1004 form, do you include the cost for the driveway in the line item for the garage (above the clculation for deprecition) or do you include the cost in the line item for "as is" vlue of site improvements - below the derecition line?

Howard
 
do we apply depreciation to this amount
not if it is listed "as is"..this is a classical, howbeit perhaps questionable, methodology to "lump sum" minor improvements. To accurately reflect the Cost App with outbuildings, pools, etc., they probably need to be segregated and judged individually. We recently did a very old 1800 SF home with a new shop and 2 acres. The value is in the shop moreso than the home. It would be misleading to lump sum the shop or house, nor does the new shop take on the depreciation of the old house....which might be the case in a 30 year old house with a 20 year old shop...where it is less contrast between condition of the individual improvements.
 
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