Functional Depreciation of Pool

[al002kim]

The property has a pool and I commented that "Functional depreciation was noted for subject not fully recovering cost of pool."
This is a FHA case and not the lender wants me to explain specifically. In my opinion the sentence is self explanatory, but any suggestions how to address this "specific" comment? Thanks in advance.

 

[Howard Klahr]

The entire home does not recover the cost of the improvements, new. Is this functional obsolescence?

 

[Thomas Fiehler]

al-Just curious as to the comment about FO. While I agree with the concept, did you also complete the cost approach? If so, did you show an amount for FO? I have reviewed numerous reports where the property has a pool but I never saw a cost approach that was correct.

 

[Howard Klahr]

Maybe that is because the cost approach on the typical residential forms show "Depreciated" site improvements, not cost new less depreciation for site improvements.

 

[al002kim]

al-Just curious as to the comment about FO. While I agree with the concept, did you also complete the cost approach? If so, did you show an amount for FO? I have reviewed numerous reports where the property has a pool but I never saw a cost approach that was correct.

Yes I did complete the cost approach with functional depreciation adjustment for pool.
Anyways, I appreciate for the comments, I just re-phrased the verbiage and resent the report.

 

[Restrain]

For the future, you can cite an analysis of pool sales and a regression analysis of the contributory value of pools vs. the cost of pools. Then take a half-dozen pool sales, do a quickie analysis, and stick in in your files for future reference.