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Does anyone recall an article write about cost and income matching exactly the same?

Stephen J. Vertin MAI

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Jan 17, 2002
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Certified General Appraiser
State
Illinois
About 10 to 15 years ago someone wrote an article about using DCF yields as plug-ins for entrepreneurial incentives within cost. As a result cost and income would continuously yield the same results? It was a fairly negative article in the sense that it believed this phenomenon was a trick that appraisers' used to fool themselves and clients. I am looking for a copy of this but can not seem to find it. I believe it was written by someone outside the appraisal profession, possibly a lender or underwriter it was discussed on this forum also.
 

glenn walker

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Oct 11, 2006
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Certified Residential Appraiser
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California
Interesting concept but since the cost approach on older buildings is usually lower than an-income or sales comparison approach --I would assume the only way the two could be the same is if the appraiser backed into his cost approach to make it the same as his income approach or ( vice versa ) If you find the article I would sure love to read it :)
 

Stephen J. Vertin MAI

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Senior Member
Joined
Jan 17, 2002
Professional Status
Certified General Appraiser
State
Illinois
The more I think about this article it may have related to external obsoletion extraction. What I clearly recall is the cost approach would come out to the same (or similar) value as the income capitalization approach (when and only when DCF was used). My memory fades on the method, but then that is what I am most interested in and why I want to get a copy of the process. It surprising I forget this because it was a method we used in the mid to late 1980s for the RTC.
 

CANative

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Jun 18, 2003
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Certified Residential Appraiser
State
California
Any chance you're thinking of Stephen Fanning in his text "Market Analysis for Real Estate" in the "Highest and Best Use Decisions" chapter?
 

Stephen J. Vertin MAI

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Senior Member
Joined
Jan 17, 2002
Professional Status
Certified General Appraiser
State
Illinois
CA, not sure. The article I saw was not an original thought. Many people noticed this at the time. Whoever wrote it just happened to be first to put it on paper. Maybe Fanning saw the same. I do not have his book. What does it say? Again, all I am interested in is the process. I want to see if it relates to something I am working on.
 

glenn walker

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Oct 11, 2006
Professional Status
Certified Residential Appraiser
State
California
When you guys find it I would love to see what that's about : )
 

RebelNYC

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Aug 6, 2009
Professional Status
Certified General Appraiser
State
District of Columbia
About 10 to 15 years ago someone wrote an article about using DCF yields as plug-ins for entrepreneurial incentives within cost. As a result cost and income would continuously yield the same results? It was a fairly negative article in the sense that it believed this phenomenon was a trick that appraisers' used to fool themselves and clients. I am looking for a copy of this but can not seem to find it. I believe it was written by someone outside the appraisal profession, possibly a lender or underwriter it was discussed on this forum also.
I'm not sure why that would be a trick. No developer uses a direct cap entrepreneurial incentive like appraisers use. They look at the equity return.
 

Stephen J. Vertin MAI

Thread Starter
Senior Member
Joined
Jan 17, 2002
Professional Status
Certified General Appraiser
State
Illinois
I would agree, I did not believe it a trick when I first experienced seeing the phenomena when working with the FDIC. To clarify it was the author who believed it tomfoolery.
 
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