cost approach
431) Cost Approach
11/15/08
Dear Henry,
Is the cost approach the best method for appraising a timber framed home when there are no timber framed comparable sales in the market area?
Stacey Allen staceyallen@tds.net
Dear Stacey,
I come from the school of thought that believes it is not a good idea to appraise any house using only the cost approach.
As far a timber framed houses go, it would be better, in my opinion, to find out where they are selling and find out how their prices compare to similar houses constructed using a more conventional method. This would give you some basis for a market adjustment for timber framing. I would then apply that adjustment to the comparable sales you select as being most similar, except for the timber framing.
H2
Is the cost approach the best method for appraising a timber framed home when there are no timber framed comparable sales in the market area?
Stacey Allen staceyallen@tds.net
Dear Stacey,
I come from the school of thought that believes it is not a good idea to appraise any house using only the cost approach.
As far a timber framed houses go, it would be better, in my opinion, to find out where they are selling and find out how their prices compare to similar houses constructed using a more conventional method. This would give you some basis for a market adjustment for timber framing. I would then apply that adjustment to the comparable sales you select as being most similar, except for the timber framing.
H2
374) Assessor's Value
08/04/08
Dear Henry,
In the cost approach when there are no land sales available even over the last two years and all comps are REO or Short Sales, you can't use the abstraction method to obtain a land value. Is it OK to use the county assessor's land value for the property as the land value for the cost approach?
GM jcvsor@yahoo.com
Dear GM,
I don't think it is a good idea to use someone else's opinion of a value in your appraisal reports. If you do, be sure to make it very clear in your report what you are doing and why you are doing it. The USPAP requires acknowledgement of any help of this kind that you receive. From what you are asking me, it is not clear why you feel it is necessary to do a cost approach.
H2
In the cost approach when there are no land sales available even over the last two years and all comps are REO or Short Sales, you can't use the abstraction method to obtain a land value. Is it OK to use the county assessor's land value for the property as the land value for the cost approach?
GM jcvsor@yahoo.com
Dear GM,
I don't think it is a good idea to use someone else's opinion of a value in your appraisal reports. If you do, be sure to make it very clear in your report what you are doing and why you are doing it. The USPAP requires acknowledgement of any help of this kind that you receive. From what you are asking me, it is not clear why you feel it is necessary to do a cost approach.
H2
174) Site Value
12/05/07
Dear Henry --
Is it true, that even though the cost approach may not be applicable due to the age of a home, that the opinion of site value is still required for a Fannie Mae loan?
Laurie Stewart geminiappraisals@charter.net
Dear Laurie,
I am not aware of any published rule from Fannie Mae that requires always providing a site value. If it does exist maybe one of our readers will send it along to me. However, the client certainly has the right to ask for it as part of their scope of work.
Fannie Mae does make it clear that the final decision as to whether it is necessary to provide the cost approach to make a credible appraisal is up to the appraiser. They go further saying that if the cost approach is used, they do require supporting information.
H2
Is it true, that even though the cost approach may not be applicable due to the age of a home, that the opinion of site value is still required for a Fannie Mae loan?
Laurie Stewart geminiappraisals@charter.net
Dear Laurie,
I am not aware of any published rule from Fannie Mae that requires always providing a site value. If it does exist maybe one of our readers will send it along to me. However, the client certainly has the right to ask for it as part of their scope of work.
Fannie Mae does make it clear that the final decision as to whether it is necessary to provide the cost approach to make a credible appraisal is up to the appraiser. They go further saying that if the cost approach is used, they do require supporting information.
H2