In sharp contrast to Carl's misguided statements, brokers' and agents' incessant pushing the limits of value, combined with the greed oriented spineless lenders who for years cow-towed to them in order to keep their business. were the actual driving forces behind the absurd and impossible to maintain run-up of prices that preceded this meltdown.  Brokers, agents and lenders only get paid when deals close.  They have vested interests in doing whatever it takes to close deals - or they make less money, or perhaps, no money.  To imply that appraisers were a part of the root cause is patently absurd.  Appraisers are among the few non-commissioned people involved in the process.  A number of crooked appraisers, allowed themselves to be led around by the nose by a bunch of crooked lenders, who allowed themselves to be led around by the nose, by a bunch of crooked brokers and agents.  Over time, the work available to honest appraisers began to disappear, as more and more allowed themselves to be used by the dishonest lenders.  The appraisers who refused to become crooked were gradually forced out of business, resulting in an inordinately high number of crooked appraisers.  Up until recent times, (since mandatory licensure of appraisers, in the early 1990s), the vast majority of appraisers were completely honest.  Getting on a lender's panel of approved fee appraisers was a difficult process that usually involved a thorough review of the appraiser's work samples and an in-depth interview with that lender's chief appraiser.  Back then, if the lender made a bad loan, they had to buy it back, so it was in their best interest not to do so.  Once the rules changed and the originating lender or broker was off the hook after the borrower made their first payment, all hell broke loose.  Lenders now only wanted appraisers who were dishonest, instead of honest, because they no longer had any actual skin in the game.  A month or two after each deal closed, they were in the clear.  This then allowed them to put pressure on appraisers to inflate values in ways never previously imagined.  Year after year, more honest and competent appraisers fell by the wayside.  Appraisal management companies, AMCs, became popular, and unlike the days of yore, when approval was an arduous process, most AMCs only wanted the appraiser to be licensed.  The bar had been lowered.  The vast majority of AMCs have three criteria for their appraisers, which, in order of importance, are:  State licensed or certified; cheap; fast.  AMCs typically take forty to seventy percent of the appraisal fees, (which they raised substantially, after implementation of the HVCC), and then give the assignments to whichever licensed or certified appraiser will do the job the cheapest and the fastest.  Now you all are living with the result.  The AMCs make more and more, the appraisers make less and less, and are expected to work for less than minimum wage, oftentimes.  To become an appraiser requires a college degree, hundreds of hours of classes and thousands of hours of supervised work experience.  That's just to become licensed.  The amount of experience to become truly good, with the exception of an occasional prodigy, is at least five to ten years.  We're the lowest paid people in the process, yet our job requires the most education and experience.

Carl's assertion that the cost approach is the most reliable approach to value is, in most instances, patently incorrect.  First, with regard to single family residential appraisal, replacement cost should almost never be used.  Replacement cost is the cost to construct a building with similar utility and with modern materials.  Typical home buyers' buying decisions are based partly on logic and partly on emotion.  People are attracted to the character and nuances of a particular home.  Otherwise, they would all just pick the size they wanted and buy a box that size.  Architecture, finish materials, styles and colors are all important considerations to most buyers.  Replacement cost usually omits many or all of these factors from consideration.  A properly prepared cost approach for a single family residence will usually consider the reproduction cost of the residence - which, in essence, is the cost to reproduce a home exactly as it exists - stick by stick.  Reproduction costs are often higher than replacement costs because of the evolution of building materials and techniques over time.  Additionally, values derived from cost approaches must consider physical, functional and external or economic depreciation.  Without factoring in such depreciation, the numbers will almost always be inflated, unless dealing with new construction, and even then, there may be functional or economic factors coming into play to diminish the reproduction cost new of the improvements.  How many realtors understand the difference between short lived and long lived depreciated components?  How many know how to properly account for such things when performing a cost approach?  What about the nuances of the underlying land's value?  View amenity, topography, shape, other factors influencing utility?    This is not a put-down of realtors - it's just putting things into perspective.  Most appraisers know relatively little about representing buyers and sellers in real estate transactions.  We are usually unfamiliar with the various types of paperwork necessary for various transactions; we are generally not good salespeople; our people skills are often limited, and I could probably go on, ad nauseum.

Each of our jobs is important, but they are distinct and different.  Folks like Carl give realtors a bad name.  Too bad for the many competent and honorable realtors whose reputations can be indirectly tainted by such misinformative diatribes.

Carl,

M&S is utterly worthless in my market.  Where you got the idea that they are the God of appraisal sites, I don't know.  Not only have materials increased in price over the past thirty years, wages have too.  What rock do you live under?

The physical life of a property's improvements and the economic life are two completely different things.  As for the concept of depreciation, I might as well be talking with a brick wall.  I'm not the IRS, and what I'm referring to has precious little to do with the tax code, tax cuts, or tax anything.  I would recommend you do a bit of checking into the various forms of depreciation - physical, functional and external or economic. 

The contribution of the improvements depend greatly upon the land upon which they're situated.  For example, a swimming pool that costs $60,000 new might add $60,000 to the value of a luxury home, in an exclusive guard gated community, but add only $20,000 to a moderate tract home a mile away, in a less opulent subdivision.  Same pool - different value.  The $40,000 loss in return to the latter property is an example of functional superadequacy, or overimprovement.  This is the difference between the contributory value of that improvement and its physically depreciated reproduction cost, (what it costs to create an identical reproduction of the component, less the diminution in value associated with any physical deterioration).

Cost doesn't necessarily equal value.  In fact, cost rarely equals value.  Simple example:  two identical tract homes - next door to each other, and situated on virtually identical lots, with identical external influences.  The only difference between the homes is that one of the neighbors just spent $35,000 on a kitchen remodel.  Do you think the typical buyer will pay $35,000 more for the home with the remodeled kitchen?  Rarely.  One other really important point is that just because one buyer will pay X for a home doesn't mean the typical buyer for that home will pay X.  Market value is what a typical buyer will pay, not that one in a thousand with the exact same tastes as the seller.

The vast majority of the time, in the appraisal of single family residential property, the direct sales comparison approach is the most applicable, and oftentimes, it is the only applicable approach.  Conversely, the cost approach is usually not applicable in the appraisal of such properties, nor is the income approach.  I agree with you that there's got to be a better way.  That would be for the GSE's, (FNMA and FHLMC), to stop trying to force us to fit square pegs into round holes.  Appraisal is part science and part art.  The introduction of regulation R-41C, in the latter part of 1986 was, in many ways, the beginning of the end of appraiser autonomy.  That, coupled with the ensuing S&L "debacle" and all that followed has all but driven a stake through the hearts of appraisers.  Unfortunately, the odds of there being less regulation and intervention of appraisers in the future is about zero percent, so the future looks pretty bleak.

Carl, once again, you started by taking what was said and turning it completely around.  the "swimming pool, kitchen and bath remodels" you mentioned have absolutely nothing to do with what you refer to as the "comparison" approach.  Obviously, it's not sinking in and I'm not going to beat a dead horse here.  All that really matters is that cost rarely equals value.  What something costs to reproduce almost never equates to what it is worth in a resale environment, therefore, that approach requires much assumption and its reliability is questionable.  Have a nice day, and feel free to have the last word, I'm fine with it.