Why are the cost from Marshall & Swift so low?

[CANative]

Relying on one data source is not responsible. Many markets move faster than a national cost publication can keep up with. I find that for most "regular" areas the cost calculator at building-cost.net works well and is easier to use than M&S. It's "good enough" for a mortgage appraisal cost approach.

 

[CANative]

the cost approach likewise may not be universally as applicable or reliable.

Unlike the sales and income approaches, the cost approach is always applicable.

 

[DMZwerg]

Unlike the sales and income approaches, the cost approach is always applicable.

"... and reliable."

The "and reliable" is important as well. As depreciation rates increase the approach becomes increasingly subjective. How must is the external obsolescence? The effective age? Estimated remaining economic life? Functional utility (including mixed due to additions)? etc?

In many (dare I say "most") cases the SCA is a more reliable indicator of SFR market value than the CA or IA. Doesn't mean the CA has no applicability, just that it may be less reliable as multiple extractions and reapplications occur in estimating depreciation.

 

[CANative]

Appraisers go for credible, not reliable. I think reliable is applicable to clients.

 

[George Hatch]

Unlike the sales and income approaches, the cost approach is always applicable.

There are exceeding few applicable "always" in our business. Inasmuch as real property appraisers appraise property rights and some of those property rights cannot be valued via cost, I'd have to back DMZ on this one.

 

[CANative]

I was just trying to get people off my back who thinking I'm a cost approach denier. And I was referring to improved properties since the thread title is Marshall & Swift.

 

[Tim Hicks (Texas)]

Relying on one data source is not responsible. Many markets move faster than a national cost publication can keep up with. I find that for most "regular" areas the cost calculator at building-cost.net works well and is easier to use than M&S. It's "good enough" for a mortgage appraisal cost approach.

Its too high in this area.

 

[CANative]

Its too high in this area.

 

[Mztk1]

Suncoast, I appraise your area, and the M&S isn't too low for me unless I am over-appraising the property. These days, it is usually too high.

You have to chose the right quality rating. You have to start with the base price and work your way through the bottom of that page, and then turn to the back of the section for materials used, the garage and porches. If the materials aren't there, like you have a house with high end marble flooring, you turn to the segregated cost section and use the marble under the floor cover, making sure you use the right quality. Once you get the entire thing done, you have to use the multiplier in the green section of the book, and then add in the as is value of the site improvements, which can be determined using the yard/unit costs.

Because we are in areas where there is usually some vacant land around, I find I can usually at the very least find enough data to develop a land value using allocation.

Once all the number are added, you'll find that 9 times out of 10 the cost exceeds the Sales Comparison Approach, and you'll have to reconcile the difference, so that the cost approach reflects market value, using depreciation. In almost every market I do by us there is economic depreciation.

 

[OSU Beavers]

The M&S cost curve seems to be too steep for my area with low end stuff being more expensive to build than MS estimates and highend stuff being much cheaper to build. So even if I use my own local cost multiplier it is not very accurate.