New Construction Builder Subdivision

[ZZGAMAZZ]

I avoid new construction assignments b/c I feel like a shill for the builder, but:
Seems like most/all my assignments are the model home that's bigger and with 3x options than anything else in the subdivision. Making dollar/dollar adjustments for base, options, lot, and incentives reveals the subject contract price. So what's the point in an appraisal?

Question: Is the subject contract price of new construction builder subdivisionexpected to be bracketed by adjusted comparable values?

 

[sputnam]

I avoid new construction assignments b/c I feel like a shill for the builder, but:
Seems like most/all my assignments are the model home that's bigger and with 3x options than anything else in the subdivision. Making dollar/dollar adjustments for base, options, lot, and incentives reveals the subject contract price. So what's the point in an appraisal?

Question: Is the subject contract price of new construction builder subdivisionexpected to be bracketed by adjusted comparable values?

Depends on the expectations of your Client.

 

[J Grant]

I avoid new construction assignments b/c I feel like a shill for the builder, but:
Seems like most/all my assignments are the model home that's bigger and with 3x options than anything else in the subdivision. Making dollar/dollar adjustments for base, options, lot, and incentives reveals the subject contract price. So what's the point in an appraisal?

Question: Is the subject contract price of new construction builder subdivisionexpected to be bracketed by adjusted comparable values?

We are not supposed to make $ for $ adjustments based on cost or a builder lot premium. We are supposed to compare other new homes of similar upgrades and size as well as use recently built resales in or outside the subject subdivision, to see how the lot premiums and upgrades price react on the open market, when the builder is not the seller.

A new home appraisal is like any other appraisal in that we typically try to bracket the subject features with comps with similar features, and typically try to bracket with price as well .

 

[Mark K]

Question: Is the subject contract price of new construction builder subdivisionexpected to be bracketed by adjusted comparable values?

Appraisal 101. Your subject should be bracketed by comparable homes, not comparable prices.

 

[Terrel L. Shields]

We are not supposed to make $ for $ adjustments based on cost or a builder lot premium.

Really? "Lot premiums" sound more like EP than a true attribute of the land. Lot pricing should reflect competitive lot prices plus utilities. I've never seen a new sub where there was not a lot of variation between sale prices. And I am confident if nothing else, I can extract the RCN from the existing sales and do an accurate cost approach to support the sales approach. Once I compare the book cost to the real cost I have a good handle on the Entrepreneurial profit, too. New construction to me is complicated only by deciphering the plans and specs and then measuring in the final inspection and finding deviations from the blueprints.

 

[Tom4value]

Really? "Lot premiums" sound more like EP than a true attribute of the land. Lot pricing should reflect competitive lot prices plus utilities. I've never seen a new sub where there was not a lot of variation between sale prices. And I am confident if nothing else, I can extract the RCN from the existing sales and do an accurate cost approach to support the sales approach. Once I compare the book cost to the real cost I have a good handle on the Entrepreneurial profit, too. New construction to me is complicated only by deciphering the plans and specs and then measuring in the final inspection and finding deviations from the blueprints.

Every single builder and realtor of new construction I deal with mentions, “lot premiums”. It is definitely a thing….for THEM! For us appraisers, as I am sure you found, there is very little, if any difference in lot prices in a subdivision. I think it is more a marketability issue over market value. Yeah, buyers will snap up the best lots first but don’t pay more.

 

[Overimprovement]

I had a friend who built a small subdivision (16 homes) on a short cul de sac. The final two lots backed directly to a RR track, which was active, getting 10-15 freight trains a day. The houses' north walls were within 50' of the tracks. Didn't matter. By keeping the dog lots til last, their inherent premium increased. So even with the adverse noise and threat of getting hit (No fences), there was no discernable price difference per lot. It probably helped that the houses were presales, so the buyers could not feel the walls shake when the trains actually came by. I do think it will be more of an issue on resale...

 

[shrubberyvaluation]

Every single builder and realtor of new construction I deal with mentions, “lot premiums”. It is definitely a thing….for THEM! For us appraisers, as I am sure you found, there is very little, if any difference in lot prices in a subdivision. I think it is more a marketability issue over market value. Yeah, buyers will snap up the best lots first but don’t pay more.

I rarely see any meaningful difference. Have you ever seen it where the builder paid more for those lots? I doubt it.

 

[ZZGAMAZZ]

Appraisal 101. Your subject should be bracketed by comparable homes, not comparable prices.

Throwing me off is that the subject as a former model home has more than $250,000 more options/upgrades than any of the 100 other bulder sales, based upon the Appraiser Worksheet of closed sales that facilitates factor-by-factor comparison.

 

[Tom D]

The model home isn't a c1 anymore. So use c1 comps, take off $250,000 for condition, them add $250,000 on xtras, un depreciated. You have to work around the existential threat.