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Cost Approach

Cost Approach . Square Foot vs. Segregated. A difficult decision. Sets the direction for the next 20 plus years The investment costs related to the direction The time frame to complete the required work The level of commitment from: The administration The leadership The staff.

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Cost Approach

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  1. Cost Approach Square Foot vs. Segregated

  2. A difficult decision • Sets the direction for the next 20 plus years • The investment costs related to the direction • The time frame to complete the required work • The level of commitment from: • The administration • The leadership • The staff

  3. MC COST HISTORY • 2013 Conversion From DOR Cost to “AZ (Arizona) MVP SEG” • AZ MVP SEG = Marshall Valuation Segregated Cost With Added Arizona Components • Problem: • Segregated Cost Was Complex; Difficult to Teach and Learn • Solution: • MC Created Templates for AZ MVP SEG to ID Base Cost Components, Limit Component Adjustments and Add-Ons. • Result: • AZ MVP SEG With Templates Is MC’s Attempt To Simulate M&S Commercial Engine (Square Foot Method)

  4. The Segregated method • Vision System Cost Conversion • Unbundle AZ MVP SEG Base Component Templates • Using AZ MVP SEG In Vision: • No More Templates • Will Be A True Segregated Cost System • Every Property Component Identified And Listed Per Brown M&S Book

  5. THE SEGREGATED METHOD • PROS • Detailed Component Information • Property Specific • More Adjustments Possible For Unique Property Attributes • The specific components create a more detailed account of what the property has in terms of the improvement.

  6. THE SEGREGATED METHOD • CONS • Complex • DOR Discussion About Segregated Cost (2003): • Marshall & Swift designed it primarily for use on large, complex buildings that require a great deal of component detail for an accurate cost value. Because of this, the system is more sophisticated than needed for most residential and commercial structures. • This has resulted in a steep learning curve for new appraisers and extended time at the property to gather data and fill out listing forms. • Back at the office, this means more work and more chance for input error by data entry personnel.

  7. The square foot method • Marshall Commercial (Square Foot) Engine Would Be Called AZ (Arizona) AZ MVP Square Foot • AZ MVP Square Foot Includes The AZ Components • Includes Base Components for All Occupancies • Permits Select Property Add-Ons And Adjustments • No Need To Create Templates; Already Built Into System

  8. Arizona Components • Golf Course (from an Executive Course to Championship Course) • Golf Course specific items such as lake liners, shelters and lighting • Mobile Homes • Agricultural Tree Crops such as apple, citrus, olive etc. • Agricultural specific items such as feedlots, sun shades, sprinklers etc. • Approximately 53 items

  9. THE SQUARE FOOT METHOD • PROS • Easier for staff to understand relationship between select components/add-ons and value • Less time in field identifying components • Fewer errors in component data entry • CONS • Cannot account for property peculiarities or uniqueness because the system develops cost for typical construction • The square foot method is more general due to less detail listed on the cost approach

  10. TIMELINE

  11. conclusions • This was a significant decision that effects the future of the office. • This decision will keep the office moving in the same direction as the assessment authorities across the country. • We will be adjusting our training to accommodate the new direction. • A review of the existing segregated has begun to verify which segregated components are part of the square foot method and which components are required to be adds to the occupancies.

  12. Questions

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