Sufficiency Of Cost Approach?

[CANative]

Maybe that's the "backing in" residential appraisers are accused of?

Dad used to say that it was built into the other costs.

 

[Mark K]

Since EI might be 10% of total project cost ($35,000) for a total of $385,000 and the market is only returning $350,000 then there might be some economic obsolescence that you are not accounting for.

You actually think that an appraiser in the example should include a random EI % and then turn around and deduct that same amount due to EO because the entity/person doesn't exist that, in some areas, siphons off an additional layer of profit?

 

[Peter LeQuire]

Dad used to say that it was built into the other costs.

Was he right? If so, are you saying that EI is included in, perhaps, contractors' costs?

 

[CANative]

EI is NOT included in the cost tables. It is more "technically correct" to include it as a separate cost. It is a good exercise to do it that way because if you consistently do the cost approach and include EI separately you'll (not you specifically) will get a good handle on it and this will help with the supply and demand situation in the market as well as other important information (not just a MV indication.)

And no, my dad had a VERY good handle on real estate but he rarely did a "real" cost approach.