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Holden's and Mr. Marx's bottom line valuations.5 The income
method, on the other hand, is embraced by both Mr. Marx and Mr.
Holden and dominates their analyses. Because the parties' main
focus is on the income method of valuing MVN and MVS, our focus,
too, will be on the income valuation method.
5 With respect to the cost approach, the estate's expert said
the following:
The Cost Approach to value is an indicator for new or
proposed improvements, however, older improvements,
such as the subject are more difficult to analyze. The
most important factor in appraising older properties is
the estimate of depreciation. Although great care is
taken in this analysis, it is difficult for the
Appraiser to truly and accurately estimate the value
losses by depreciation. This is mainly due to the lack
of full knowledge of the infrastructure of a building.
You cannot see into the walls and many areas are
inaccessible. Therefore, it is difficult to determine
the true condition of all building components. This
weakens the support for the depreciation estimate. The
typical purchaser does not generally use this approach
to make an investment decision. * * * Also, there is
a lack of * * * [comparable] land sales. This makes
the analysis for the land value weak. Therefore, this
approach is given least weight in support of the final
estimate of value.
As for the sales comparison approach, we are concerned about the
lack of suitable comparables in the Monecito-Santa Barbara area
upon which to base any meaningful analysis. Mr. Holden echoed
this concern in his report, stating that "Due to the varying
characteristics of the sales data, direct market comparison [as a
method to value MVN and MVS] is weak." Under the circumstances
of the instant case, the sales comparison approach is unreliable.
This unreliability is reflected in Mr. Holden's report where he
abandons his cost approach and sales comparison analyses and
adopts whole hog his conclusions from his discounted cash-flow
analysis as the fair market value of MVN and MVS.
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