New construction 50% complete as-is value

[Tom D]

asking for the as is value for semi-completed new construction is like asking for the REO value of your appraised just sold value. 2 separate work files needed. but i bet you are getting paid for 1 appraisal, that's why i don't do them when they want an as is value.

 

[KONA]

Lots of risk, taking over an unfinished project. Is the work to-date done to plans/specs and approved by the local jurisdiction? I have seen, in my career, many incomplete projects with a lot of inherent construction problems that the new contractor has to deal with; even to the extent of demolition of the original construction and starting all over again. Consequently, as GH and TS said, a lot in inherent risk that needs to be compensated for.

 

[J Grant]

deleted wrong thread

 

[George Hatch]

Lots of risk, taking over an unfinished project. Is the work to-date done to plans/specs and approved by the local jurisdiction? I have seen, in my career, many incomplete projects with a lot of inherent construction problems that the new contractor has to deal with; even to the extent of demolition of the original construction and starting all over again. Consequently, as GH and TS said, a lot in inherent risk that needs to be compensated for.

^^^ Wut he said.

Sometimes they get the plans and sometimes they don't. Unfinished projects are commonly exposed to the elements for months at a time so that exposure can cause a lot of damage. A BUYER taking this project on can expect to run into some unforeseen problems. IMO most appraisers should generally avoid these assignments unless their Cost Approach / New Construction game is on point.

 

[Terrel L. Shields]

In 2008 or so, I did an appraisal of a new construction where the builder - trying to take the approval of an 1800 SF house - started construction of a 2,200 SF house - nothing like the plans and specs. He hoped to stretch the money to make a cheaper but bigger house to sell. He folded about half way through the project. The bank took the property, then they hired another contractor to look at it. He realized it was not the plans and specs the bank provided, informed them, and told them what he thought it would take to finish. The bank was rather flabbergasted but agreed. To do what he felt it needed, he did move some of the interior walls and the house was framed and roofed but not to go beyond the sheetrocking yet. The contractor had started the week we first got to the property. The builder ended up finishing it and liked it so well, he bought the bank out and moved in himself. His wife was a teacher at the school next door and could walk to work. Banks don't normally get that lucky. I made weekly construction inspections for the bank which was in Little Rock 200 miles away. This is the original stopping/starting point within a week and the final finish short a few minor items at which point we were dismissed but it was six weeks or so of EZ PZ inspections (BTW - in 2007 as the market was just starting to tank.)

 

[mp2277]

Unless it was an extremely slow time would not accept this assignment. This is the kind of thing that can bite you in the *** years down the road. I personally cannot see any legitimate way to use the cost approach in a defensible manner absent similar comps which I assume do not exists. And if I did accept it I would charge double plus a couple hundred and would shed no tears if they declined. JMO

 

[Zoe]

Unless it was an extremely slow time would not accept this assignment. This is the kind of thing that can bite you in the *** years down the road. I personally cannot see any legitimate way to use the cost approach in a defensible manner absent similar comps which I assume do not exists. And if I did accept it I would charge double plus a couple hundred and would shed no tears if they declined. JMO

It is basically two different assignments so whatever this appraiser charges, they need to charge double plus.


I would be comfortable with it and getting a good handle on cost to complete which could take a long time.

 

[Zoe]

Are you sure you don't have covid or something? LOL

 

[Terrel L. Shields]

thing that can bite you in the *** years down the road.

Any bank regulated by FDIC, OCC, et al, must abide by the IAG. It is required to have both as is and as complete values. Therefore, one could put down the site value as the "as is" value and the bank don't care. They just want to CYA if the bank examiner wants to see an as is value and an as complete value during construction. Therefore, once the property is complete, the as is value is meaningless and a permanent loan is made.

 

[mp2277]

I would be comfortable with it and getting a good handle on cost to complete which could take a long time.

I understand the methodology and reasoning there but I am still very leery of the market approach there. If an investor is going to take on that project they are going to have a profit motive and where do we find that in the estimated cost to cure? I'd leave this to the more adventurous types unless my liquor cabinet was looking bare LOL