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Value Definition For Depreciated Cost Of Improvements?

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SwampFox

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Nov 7, 2008
Professional Status
Certified Residential Appraiser
State
South Carolina
Working on an assignment for a general contractor who needs an appraisal showing only the depreciated cost of improvements for a property he's about to do a major renovation on. Per local rules, the renovation budget can't be greater than 50% of the depreciated cost of improvments so he needs something to show the town what what that figure is. I'm completing a report on a GP form for him and only completing the cost approach since that's all he needs so the final number is not going to be a market value figure.

Anyone know a good definition of value to use here (with a citable source)?
 

SwampFox

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Nov 7, 2008
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Certified Residential Appraiser
State
South Carolina
Awesome! Thanks Terrel!!
 

BRCJR

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Sep 20, 2005
Professional Status
Licensed Appraiser
State
Virginia
Is this more in line with a consulting assignment instead of an appraisal assignment?
If so, couldn't you just do a letter and not a "form" report.
 

Restrain

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Jan 22, 2002
Professional Status
Certified General Appraiser
State
Florida
Definitely an appraisal since you need to estimate the value of the property, then extract the site value to get depreciated improvement value. Have hit these down here on older properties in flood zones.
 

leelansford

Elite Member
Joined
Mar 29, 2002
Professional Status
Certified Residential Appraiser
State
Illinois
Working on an assignment for a general contractor who needs an appraisal showing only the depreciated cost of improvements for a property he's about to do a major renovation on. Per local rules, the renovation budget can't be greater than 50% of the depreciated cost of improvements so he needs something to show the town what what that figure is. I'm completing a report on a GP form for him and only completing the cost approach since that's all he needs so the final number is not going to be a market value figure.

Anyone know a good definition of value to use here (with a citable source)?

"Depreciated cost": Are you limiting the analysis of depreciation to ONLY physical depreciation?
 

Michigan CG

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Nov 1, 2006
Professional Status
Certified General Appraiser
State
Michigan
Sales comparison approach and subtract land value. I think that would be more reliable than a cost approach. But that takes into account all forms of depreciation.
 

Howard Klahr

Senior Member
Joined
Oct 4, 2004
Professional Status
Certified General Appraiser
State
Florida
Per local rules, the renovation budget can't be greater than 50% of the depreciated cost of improvments
The applicable definition/description of how the value is determined is contained within the local code to which you reference. For example, the Florida Building Code utilizes the concept of Value Determination which is defined/described as follows:

Value Determination - The value of a building or structure shall be the estimated cost of constructing a new building of like design, size, and materials at the site of the original structure, assuming such site to be clear. Cost of additions, additions or repairs shall be constructed as the total cost of labor, material and services based on current prices for new materials.

FEMA uses a concept of substantial improvement which is based on the pre-damaged or the before improvement less the cost of the repairs/improvements to determine if the ratio achieves the threshold requirement. The costs for the repairs/improvements represent the actual costs and the pre-damaged before improvement is based on the estimated market value prior to the occurrence that caused the damage.
 

hastalavista

Elite Member
Joined
May 16, 2005
Professional Status
Certified General Appraiser
State
California
The applicable definition/description of how the value is determined is contained within the local code to which you reference. For example, the Florida Building Code utilizes the concept of Value Determination which is defined/described as follows:

Value Determination - The value of a building or structure shall be the estimated cost of constructing a new building of like design, size, and materials at the site of the original structure, assuming such site to be clear. Cost of additions, additions or repairs shall be constructed as the total cost of labor, material and services based on current prices for new materials.

Sounds like reproduction cost.
 

nstanbru

Senior Member
Joined
Feb 19, 2009
Professional Status
Certified General Appraiser
State
California
Sounds like reproduction cost.

Interesting take. To me,it sounds like replacement cost with the use of the word "like" (as in similar, not exact) in design, size, etc.
 
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