Extraction Method

[alebrewer]

If you are utilizing a singular property for extraction, your cost estimate and depreciation estimate better be dead on. If you widen the data set, your level of confidence in your cost estimates and depreciation estimates does not need to be as exact.

You arguing that the appraisal of real estate's usage of singular instead of plural as definitive evidence that you only have to use a singular extraction indication is laughable.

please see my comment on the example given by The Appraisal of Real Estate. I'm guessing that you think that text is laughable as well?

 

[Deleted member 152047]

1

 

[alebrewer]

Having LOTS of fun by the way, guys. Thank you!

 

[alebrewer]

from a singular COMPARABLE... not the subject. And nothing in USPAP requires you use THREE or more sales as comparison...Yeah, you could use just ONE...but the idea of using multiple sales either in the SCA or in the analysis of land value implies you are attempting to at least corral the value somewhere within a range. A single sale might be necessary...you may not have any other, but I don't think in 30 years I've seen that situation, or at least not in common garden variety housing or land (be it lot, acreage, ranch land, or farmland)

Absolutely agree with you, Terrel! There is no requirement that only the subject (or one comparable sale) be utilized, but there is no requirement that it has to be more than one, either. I don't know how I've hit such a nerve with folks - I've simply stated what the text offers about the subject - and, per the text (as well as the example proffered in the text) - only one property is analyzed. As I've said repeatedly, though, the more observations you analyze, the stronger your opinion will be.

 

[George Hatch]

Correct - and in the example given by the text, the authors do as well...

You're going to have to point that clarification out to me because I am not seeing it. Where does it say "the subject property"?

 

[alebrewer]

I compare data to each other before I import the results of that comparison for use in comparing these comps to the subject.

I never include the subject as one of the datapoints in a sensitivity analysis.

The example of extraction given in The Appraisal of Real Estate does not specify whether to use the subject, or a comparable sale, but I wouldn't think it inappropriate to perform extraction on either, with the understanding that you have solid support for your estimate of market value, if you're using the subject.

 

[alebrewer]

You're going to have to point that clarification out to me because I am not seeing it. Where does it say "the subject property"?

sorry - was just responding to your earlier comment. That is a great point - it doesn't specify. To me, it seems that the example given in the text infers the subject, but that is ambiguous.

 

[George Hatch]

None of which is articulated in your reference.

Nor is your inference on this one consistent with any other form of extraction that we use. You're working on a real orphan here. And TBH this is exactly the first time I've ever heard any appraiser explain land value by extraction this way.

What I have seen a lot of over the years is appraisers doing cost numbers in their cost approach , inserting the results of their sales comparison into the bottom line and then proceeding with the idea that sales comparison - depreciated costs = site value, and calling THAT land value by extraction. But thankfully you're not doing that, so that's a good thing.


BTW, "ambiguous" usually comes up as a result of reading something into an established and considered explanation that isn't otherwise there.

 

[gregb]

Using the subject to extract its own site value is akin to using the subject to develop a grm or cap rate in a commercial assignment.

 

[alebrewer]

None of which is articulated in your reference.

Nor is your inference on this one consistent with any other form of extraction that we use. You're working on a real orphan here.

BTW, "ambiguous" usually comes up as a result of reading something into an explanation that isn't otherwise there.

So this is the example given from the text: "..., assume an appraiser is estimating the value of the land under an aging, deteriorated automobile service garage that was recently sold for $575,000. No vacant lots have been sold in the market area recently. The appraiser estimates the cost of the improvement at $200,000 and total depreciation at 80%, indicating that the depreciated cost of the improvement is $40,000. Deducting $40,000 from the $575,000 sales price, the appraiser obtains a residual land value indication of $535,000 by the extraction technique." The text does not specify whether the property under consideration is the subject property, or a comparable property. Again, in my opinion, it infers that it is the subject property - but that is my opinion. I have absolutely no argument if someone infers that it applies to a comparable sale...