Value Definition For Depreciated Cost Of Improvements?

[SwampFox]

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)?

 

[Terrel L. Shields]

Net Book Value = Cost of the Asset minus accumulated depreciation
http://financial-dictionary.thefreedictionary.com/net+book+value

 

[SwampFox]

Awesome! Thanks Terrel!!

 

[BRCJR]

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]

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]

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]

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]

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]

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]

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.