What it cost to build B is rather irrelevant. Homes, just like storage units, are most frequently built with economies of scale not available to the construction of just one unit, which are always considerably higher. So, what cost calculators and methods do you use? Does the unit have air conditioning? What about insulation? Now take this analogy to your home; upgraded carpeting, and to what level of upgrade; granite or tile kitchen counters; hardwood or laminate cabinets, etc. Next, which general and subcontractors will be used? What are their estimates, and do they have access to discounted materials, and to what extent? (I’ve never found the typical cost-index guides the least accurate when it comes to actually doing the building. Ask anyone who’s suffered a property loss and received an insurance settlement offer!) Another problem with the Replacement method is the inclusion of land; perhaps not as much of a challenge in rural areas, but a near impossibility in built-up and out urban locales. (Find a truly comparable, recent single lot sale in the typical urban setting, if you don’t believe me.) The next difficulty derives from estimating loss attributable to physical depreciation. For any reliable estimate, to determine how much loss has been suffered, you’ve got to know two dates: when it was built, when it will fall. It’s the last challenge I challenge anyone to provide by any means than an out-of-the-rear-sphincter guess. Thus, anyone attempting to browbeat an appraiser for failing to employ the Replacement Cost Approach just doesn’t know what he or she is talking about.
But here’s where we get to the hole in the hull that sinks not only Ms. Cipa’s attack on appraisers, but those urged by the exceptionally well-moneyed financial institution clients during the Reagan administration. The losses suffered were in the billions and billions and billions of dollars. Very few appraisers put all their eggs in one basket, having only one source for their assignments. I knew or knew of perhaps a hundred working in my area, and I knew not a one who was so foolish. A very busy appraiser might complete 35 to 50 assignments per month. Aside from some quite high-priced regions, which the SF Bay area was one, the average home value in the country approximated $50,000.00. Even if a few appraisers were egregiously corrupt, which I knew or knew of none (How many in their right mind are going to risk a $50,000 income to intentionally bend a value estimate, an estimate that is based on confirmable sale data, to continue to receive assignments from one of a collection of their clients, and/or how much would that client have to pay the appraiser to commit banking fraud?), do the math. Recall that the losses were in the multiples of billions of billions. How could appraisers possibly have sunk an entire industry that huge?
On the other hand, who were the officers and who were the institutions and who were their political clients, and how much taxpayer money was being sought to free them from the hook? If they could manage to deflect responsibility for the calamity, exactly as is the case today, what did they have to gain, if their deflecting efforts were successful?
How has this any connection to the larger picture today, a picture of other issues? The unfettered free market works miraculously, and when it doesn’t, don’t blame its most ideologically passionate adherents, those most enjoying life at the most rarified reaches of the food chain, find a scapegoat, preferably among those least able to defend themselves! And when you do blame someone, don’t let facts and the application of objective analysis prove an obstacle to the end result that’s being sought.
— Ed Tubbs
(Note: You can view every article as one long page if you sign up as an Advocate Member, or higher).
