Remaining Economic Life

[EDWARD BERRY]

I still maintain that effective age (reguardless of expected life,50,55,60 or even 65) is a fuction of care and thus is on an individual property.

Thanks for the exact article that I could not remember(Appraisers Del.)

Ed in Arkansas--doing mostly repos and relos with no sale price known.

Do a CA on all. great fun.

 

[Ida S. Romo]

George W. Dodd

Apology graciouslyaccepted.

Ida

 

[Fred]

Austin,
I like the ghost story. Very funny. But I feel the same way. You put up a formula this morning that says extract the land value to get the depreciation, then your last post says do not extract the land value because it distorts the deprecation. Never mind.

 

[Austin]

Steven:
I was addressing the question of the theory of economic age/life methogology what it is and how to use it properly. It is not my theory it is the conventioanl book theory. If you use my method I just explained of having the land value based on the same highest and best use of the property as improved, then it makes no difference if the land value is in or out. The point is if the land to value ratios are different for each sale then your are skewing the improvement contribution by injecting H & BU differences which is meaningless. It seems me that the last time we had this debate you mentioned making adjustments for H & BU which makes no sense to me.

 

[Fred]

Austin, debating ghosts?

In your 628P post
"You say the depreciation comes from the market"
I did not say that.

In your last post, you have
"It seems me that the last time we had this debate you mentioned making adjustments for H & BU which makes no sense to me."
No I did not say that either.

So I have another ghost, a phantom Santora. Austin, I get the impression you do not actually read or absorb the posts. I never mentioned HBU. You are one who keeps bringing it up. And saying that two SFRs in the same neighborhood would somehow have a different HBU??

What I did say is in the square-foot adjustment discussion, is that one must adjust sales for land value where the land values are different or use house that have relatively equal lots or the price per-GLA for each will be skewed by differential land contribution. As far as I know, even the lowly 1004-form provides a line to adjust for different land (site) values.

As far as conventional book theory, I guess it depends on what book you read. Can you show me a book that does GLA adjustments or GLA analysis on the entire market price and leaves in unadjusted differential land contributions to skew the GLA? That sounds like some sloppy assessor model or sloppy avm.

 

[Steve Owen]

Debating you is like chasing a ghost inside a room with no doors. You get the ghost cornered and he disappears and reappears in another corner.

That could certainly be said of both of you; I'm swearing off on it. Seems like every time I get into one of these posts I wind up having to explain something elemental. Go back and read my method (hint, you left out sales price in your questioning of it).

Maybe there's a reason they won't accept your word for it. ya think?

FYI: I was audited a couple of years ago - the authorities didn't have any problem with this method of getting depreciation from the market. In fact, the verbal comment I got was it was good that I was getting info from the market instead of just using age/life without any data to back it up. After you've done it on enough representative homes, then you have a database of information on depreciation taken directly from the market. That database can be used to compare to your subject property - geez, you guys are unreal.

 

[Fred]

Steve O. writes,
That could certainly be said of both of you"
Guilty as charged (twice), but hey, that goes for you too. :lol:

You write,
"Seems like every time I get into one of these posts I wind up having to explain something elemental."
I noticed that. :!:

From my view, the cost approach is based on on assumptions that are either false, or contradictory to the appraisal principles we all supposedly learned on day one (no software pun intended). When I question the underlying assumptions and principle contradictions to see why some appraisers cling so hard to the dogma, it seems to trigger this reaction, 'oh, this goofball hasn't memorized the basic dogma, so I'll repeat it to him starting from square one.'
So yes, I agree with you 100%, Steve, having been on the receiving end of quite of a few elemental explanations. If I ask further, I usually get the 'you-just-don't-understand' thing.

I usually do not tell war stories. Here is a first and last exception...
About 10 years ago, I took "report writing" from the AI, which turned out not to be report writing, but practice writing an MAI demo. Each morning in class, there was a spiel on what to say about each part of the appraisal and a grammar lesson. This was before laptops, so it was up to the hotel room from noon-till-midnight with a room-service pot of coffee to HANDWRITE a 150-page narrative (hand made XY graphs too).

A few weeks later, the grader's sheet arrived, saying that I passed. The sheet contained two gratuitous editorial comments:
one, critiquing me for picking from the middle of ranges instead of arguing one comp was best and giving it all the weight (if I knew I could get away with that, I would have figure out the best comp right off, and saved myself 60 pages of writing).
the other, praising my "excellent discussion of depreciation and obsolescence."
So, I do know the cost approach catechism by heart. Thanks to you and Austin for helping me. Probing and ghostbusting the ideas of those who disagree with me is the only way I know of learning more. I have already consulted the moldy literature going back to the time of the McKinley adminstration.

 

[Austin]

Steven wrote:

Thanks to you and Austin for helping me. Probing and ghostbusting the ideas of those who disagree with me is the only way I know of learning more.

Steven: You finally figured my MO out. Think of it as group therapy because that is the way I think of it.

You mentioned the AI’s report writing class: I took that class in the early 90’s at the U. of GA., conference center. I took my entire office including computer, printer, and copy machine. I finished the report about 7:00PM Friday night and had it lying on the dresser table all finished. The room phone rang. I answered and the hotel clerk informed me that a large tornado had just touched down in Athens, GA., near the campus and for me to head immediately for the basement. I grabbed by report, stuck it in a large folder, stuck the folder in my pants and headed down the steps to the dungeon. I figured if the report went I would just go with it.
I got my letter stating I passed a few weeks later. The only comment was the grader said he didn’t like the way I did the break down method in the cost approach. That comment really taught me a lot, like for instance what exactly didn’t you like about it.
Let me tell you another reason I keep these debates going on this forum. I took the AI’s class on case studies at the U. of S. FLA., in Orlando. There were appraisers from all over the country. The one thing I learned from that class is that there is more than one way to skin a cat. These guys were senior MAI candidates and I have never heard such nuances and twist on appraisal theory in my life. I can assure you there is no consensus as to methods and practices. The more I debate them the more I understand by seeing the slant other people put on it. Shooting holes in the theories of each other is a good exercise for the mind and an excellent learning method. I think they call it the Socratic Method.

 

[Fred]

Austin,
The Socratic method asks questions. I happened to catch about five minutes of the last national spelling bee and they had some word for it -'maieutic' - (or something like that). I looked it up. Sounded like my posts - all questions. That's when I got scared. They poisoned him. 8O Really, go back and look at my first post in the thread. It is all questions and you said, 'I know what you mean." :!:

You must have known the syllabus of that report writing class ahead of time to come loaded for bear. I did not. I finished the report the Friday at 5PM. The report needing editing, but I was sick of it by then and wanted to have a few beers with the instructor who was an interesting chap. I can appreciate you protecting your report. I know how much work went into it. I also took that case studies course - back-to-back with report writing. The case studies class was a big waste of time in my view. Did not learn a thing.

I still want to see your solution to the work book problem.

 

[Thomas N. Morgan]

As someone remarked, this has been a great thread. People who actually practice a profession are the ones who shape the way it is practiced. Would that I could take it all in and write a coherent summary!

Regards,

Tom