Site Value For Cost Approach?

[bradellis]

Steve,

Your quote:

"Since the cost approach is not relevant in 100% built-up areas, "the depreciation" needed for the cost approach is outside the necessary scope of research and analysis. "

Please enlighten us- why is the cost approach not relevant in 100% built-up areas?

Brad Ellis, IFA, RAA

 

[Fred]

Brad
If my first post in the thread does not make it clear enough, I am not sure what could I add? Looking from the other side for the moment, the only reason anyone has come up with in this thread to support including the method in the scope of work is lender pressure.

you seek site value and this should be based upon sales other than your subject.

Those land sales other than the subject simply do not exist in a 100% built-up area. Wouldn’t most appraisers say that creating a hypothetical comp and putting it on the grid as sale 1 or sale 2 is bad practice? So why would it be different to create a hypothetical land sale as part of an exercise to create a non-existent basis of comparison in the cost approach?

Isn’t that the same reason cost approaches are not done for condo units, the lack of 1/100(?) undivided land interests available on the market means the buyer does not have as a substitute alternative building a new replica or replacement condo unit?

 

[jtrotta]

Steve

Condo's are not a good example, the difficulty would be trying to determine the cost of the building IMHO - as the plumbing; electrical; (in some instances heating); insulation; Roofing; underlayment; siding; windows; doors; gutter's; water & sewer; are purchased on a "mass quantity" basis, therefore the difficulty in attempting to estimate a cost "per unit". Also, the cost for "Land" for a Condo must take into consideration other factors, than that of a "single family" residence.

h34r:

 

[bradellis]

Steve,

I continue to be surprised about your "hypothetical" crusade. There is nothing hypothetical about a cost approach on a developed property. That is, unless you have no other way to opine the value of the site except thru direct dales comparison.

I have other ways- and we are all taught them. You know them as well, so what is going on? Just expecting us all to roll over and agree?

BTW- I worked for decades in the Chicago market and heard this 100% built up claim over and over. BUT, I have never actually SEEN one. There are always some lots being sold- here and there. Sometimes rare, but they did exist.

Brad Ellis, IFA,RAA

 

[JSmith43]

Brad:

Doesn't it get tiresome scratching out Estimated Site Value & writing in Opined Site Value in the 1004 Cost Approach?

 

[bradellis]

Rog-

Nope. My blanket statement says that everywhere a form asks for an estimate it really really really means opinion!

Brad Ellis, IFA,RAA