Remaining Economic Life

[Zoe]

That's like that Mississippi delta farm land that is so rich. The farmers know pretty much what it is worth per acre.

 

[Salty]

AMCs do not pay enough to do this properly. This why so few res reports I have seen have any kind of actual explanation as to how REL was derived. Even I have been known to slap a number on there with no extra commentary. I know that is no the right thing to do. The HBU analysis and REL calculation, both when done properly, take time. No one cares either. All lenders care about is that there is a number there so you can be on the hook. But who keeps the same loan for decades? So I think the liability is low. Until appraisers start getting pinched en masse few will actually take the time to do it the right way. Good for the OP in taking the time to do it.

 

[Zoe]

AMCs do not pay enough to do this properly. This why so few res reports I have seen have any kind of actual explanation as to how REL was derived. Even I have been known to slap a number on there with no extra commentary. I know that is no the right thing to do. The HBU analysis and REL calculation, both when done properly, take time. No one cares either. All lenders care about is that there is a number there so you can be on the hook. But who keeps the same loan for decades? So I think the liability is low. Until appraisers start getting pinched en masse few will actually take the time to do it the right way. Good for the OP in taking the time to do it.

No telling what they charged lender or borrower. That's why I hate commingled fees. I will hate commingled fees til the day I die. If I was President, my first executive order would be kill commingled fees.

 

[alebrewer]

You seem to be engaging in some creative reading here. I never said anyone advocated that. Regardless of your feelz in this discussion, this is what I actually said:

"Okay, but that still doesn't justify appraisers automatically skip even looking for land sales data and going straight to backing into land values and calling it extraction. To the extent that's what the CA means to some appraisers as a group then its no wonder they don't think the 15-second CA is credible. The way they're doing it isn't credible."​

When I was an investigator - and even now as a plain old appraiser - I'd have LOVED to see ANY documentation of derivation of the site value estimate - land sales or otherwise. Typically it was PFA, which is not a recognized method of site value derivation. Remember, at the end of the day, we are required to have substantive support for our opinions and conclusions. Extraction, when actually performed, is one recognized method (at least recognized by The Appraisal of Real Estate - even if not by you) of doing that. Again, SCA is - IMO - a much more credible approach, but extraction IS a recognized approach and if such is in the appraiser's work-file, then who am I to say whether they spent 15 seconds on it or 15 days?...

 

[glenn walker]

My Savings & Loan Handbook from 1988- According to most architects and engineers a typical stick built home, using standard builder grade materiel = Physical Life is 65 years - So 65 years is where you start : )

 

[alebrewer]

My Savings & Loan Handbook from 1988- According to most architects and engineers a typical stick built home, using standard builder grade materiel = Physical Life is 65 years - So 65 years is where you start : )

at least that's support...

 

[George Hatch]

When I was an investigator - and even now as a plain old appraiser - I'd have LOVED to see ANY documentation of derivation of the site value estimate - land sales or otherwise. Typically it was PFA, which is not a recognized method of site value derivation. Remember, at the end of the day, we are required to have substantive support for our opinions and conclusions. Extraction, when actually performed, is one recognized method (at least recognized by The Appraisal of Real Estate - even if not by you) of doing that. Again, SCA is - IMO - a much more credible approach, but extraction IS a recognized approach and if such is in the appraiser's work-file, then who am I to say whether they spent 15 seconds on it or 15 days?...

I never said I don't recognize extraction as a legitimate method or that I would never use it. What I said was that I consider a last resort, for use when I have no other options.

You mentioned yourself that you consider SCA to be the dominant approach to valuations, and for most property types I agree. That includes when I'm valuing land for a CA.

Especially when the assignment involves a house+extra lot.

 

[George Hatch]

AMCs do not pay enough to do this properly. This why so few res reports I have seen have any kind of actual explanation as to how REL was derived. Even I have been known to slap a number on there with no extra commentary. I know that is no the right thing to do. The HBU analysis and REL calculation, both when done properly, take time. No one cares either. All lenders care about is that there is a number there so you can be on the hook. But who keeps the same loan for decades? So I think the liability is low. Until appraisers start getting pinched en masse few will actually take the time to do it the right way. Good for the OP in taking the time to do it.

All it would take to prompt more appraisers to perform these processes would be if Fannie added these fields to their forms.

 

[alebrewer]

In

Until appraisers start getting pinched en masse few will actually take the time to do it the right way.

In TX, almost every disciplinary action involves some issue with the CA documentation. You're much better off not even reporting the CA, than doing a sloppy, unsupported one...

 

[glenn walker]

In

In TX, almost every disciplinary action involves some issue with the CA documentation. You're much better off not even reporting the CA, than doing a sloppy, unsupported one...

Thats true also in California, in a State Board Review probably less than 10% of all residential reports have a Cost Approach that was supported by any land or lot sales, and almost every review I have ever done the cost approach was simply backed into. The goal is a USPAP violation based on creating a report or part of it that is not credible or supported by the data.

Give me almost any report that is located in a dense urban or suburban area like where I live and I will guarantee you that the appraiser has no lot or land sales and he just made the cost approach be close to his SC Approach. The same goes for the income approach on 2 to 4 units and his GRM is normally just made up to create a number similar to the SC Approach. The truth is since F & F will not purchase a loan and since the major lenders won't fund a loan based on a Cost or Income Approach, it's almost like they have set the appraiser up to fail if he gets into a State Board Review.

This thread is peer evidence on how difficult it is to complete an-accurate cost approach . The real old guys like Uncle Billy at 93 says that prior to WW-11 residential appraisers rarely used sales comparables but used the cost approach, but that was Pre-Levitt Town Tract Homes, and after WW-11 the GI Bill and FHA went to the SC approach I don't know if that is true, depends on how much Uncle Billy had to drink on that particular day : ) LMAO