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Home appraisal in the real estate market is often not very rigorous. There's a basic set of rules the vast majority of professional appraisers use to derive a m

by sidlls 10y ago

Home appraisal in the real estate market is often not very rigorous. There's a basic set of rules the vast majority of professional appraisers use to derive a market estimate. It's weighted heavily toward "comparable" (homes with similar size, room configuration, etc.) nearby recent sales with adjustments for certain renovations, condition (e.g. deterioration; estimates start from an assumption of "good, working condition"), and possibly other factors. Actually computing the market value as a "cost-to-build-today" is rarely done, at least for home sales the typical consumer is going to be involved in. And those appraisers can be very biased in either direction.

ensignavenger 10y ago
The standard HUD uniform residential appraisal report requires a cost to build estimate. I have never seen one without that estimate completed. However, I bought a home last month which had 2 different appraisals done on it, and neither one had any weight given to the cost to build. (Despite the fact that the appraiser claims otherwise, I can mathematically prove that there was no weight given to that method.)
- intrasight 10y ago
  I can't imagine any scenario where cost to build would weight into appraisal.
  - ensignavenger 10y ago
    If the appraisal is being used to determine appropriate insurance coverage or even an insurance pay out; or possibly a court ordered payout if someone else were to destroy a property; then it would likely be the primary weight. But lenders generally don't care so much about the cost to build, so an appraisal ordered by a lender generally won't. That being said, my recent appraisal (I was financing the purchase) said "All 3 approaches to value considered with most weight placed on sales comparison approach." I could mathematically prove this statement false, as the cost to build had zero consideration on the value. I think it is mostly a canned statement. Maybe they have a different definition of the words "considered", and "most". :)
- sidlls 10y ago
  Yes, but the estimate provided there is, in my experience at least, rarely computed rigorously. And even when it is, I've never seen it used as part of the appraisal.

by sidlls 10y ago

ensignavenger 10y ago

The standard HUD uniform residential appraisal report requires a cost to build estimate. I have never seen one without that estimate completed. However, I bought a home last month which had 2 different appraisals done on it, and neither one had any weight given to the cost to build. (Despite the fact that the appraiser claims otherwise, I can mathematically prove that there was no weight given to that method.)

intrasight 10y ago
I can't imagine any scenario where cost to build would weight into appraisal.
- ensignavenger 10y ago
  If the appraisal is being used to determine appropriate insurance coverage or even an insurance pay out; or possibly a court ordered payout if someone else were to destroy a property; then it would likely be the primary weight. But lenders generally don't care so much about the cost to build, so an appraisal ordered by a lender generally won't. That being said, my recent appraisal (I was financing the purchase) said "All 3 approaches to value considered with most weight placed on sales comparison approach." I could mathematically prove this statement false, as the cost to build had zero consideration on the value. I think it is mostly a canned statement. Maybe they have a different definition of the words "considered", and "most". :)
sidlls 10y ago
Yes, but the estimate provided there is, in my experience at least, rarely computed rigorously. And even when it is, I've never seen it used as part of the appraisal.