What is a Marshall & Swift Replacement Cost Report?
As a custom builder for 27 years, I have come to the point of being very frustrated by this handbook. In the current format, I believe it is totally unrealistic in describing value. We recently received an appraisal based on the handbook which told us the custom home (with very high end finishes and many built ins) should be able to be replaced for $117.64 per square foot. We could not supply all the material in the house for that, let alone any labor for ourselves and our trade subcontractors. As long as this is the guideline for appraisers, there will not be much activity in the custom home market.
Michael Corlis, pres. Corlis Design & Construction Inc. mc@corlisdesign.com
Incomplete knowledge of the process for properly creating a cost approach using the handbook is the most common reason for dissatisfaction with the results. M&S provides training in both the Residential Cost Approach and the Residential Cost Handbook. Also, technical support can answer questions and provide some guidance (they can’t legally do it for you, not being appraisers) in how to complete the cost approach properly. If the cost approach had been the basis of value in California, rather than the vagaries of an over-inflated market, perhaps the recent economic crisis would not have been so extreme.
Marshall and Swift Residential Cost Handbook is a standard in the industry for estimating replacement cost as it has been used in the appraisal field for almost fifty years. This handbook is updated each quarter with national and local information useful for the practicing appraiser. Replacement Cost is the cost of construction at current prices of a building having utility equivalent to the building being appraised but built with modern materials and according to current standards, design and layout. The use of replacement cost concept presumably eliminates all functional obsolescence, and the only depreciation to be measured is physical deterioration and economic obsolescence.
