Anyone care to educate me on developing the As-Is value mid new construction?

[George Hatch]

Problem identification is going to be a significant issue in this type of assignment. Understanding what you're seeing WRT what has already been completed vs incomplete. That's where having a table like this might come in handy:

Completion by COST

 

[TerryRohrer]

Again, much of it is a stab in the dark and the appraiser should explain their decision to discount or not discount and why.

Much like using depreciation tables to establish market value of special use improvements without any sale data, eh?

 

[Overimprovement]

I've never run into that situation. 10 years ago I did a per-construction appraisal. The guy was in deep but tried to build a larger home than the approved plans and specs but ran out of cash and let the bank have it back. The lender then contracted someone to look it over and that's when they found out it was not being built to spec but was built about 400 SF larger. It was framed, decked, roofed. The new builder made some proposed changes to the layout and moved some walls. In the end, the builder bought the house for what the bank had in it and moved into the house himself. It was only a block from where his wife taught school. So, what "discount" applied? The guy got paid for his labor and ultimately paid the bank what they were owed...which was the draws from the first builder. What discounts were there? Both bank and builder were happy and all it cost the bank was me going back weekly and telling them what had been done that week. Took the guy 6 weeks if I recall correctly to finish.

So you are saying the market is builders who want to move into a home themselves? This is a one-off example in my opinion, and I would not want to apply that to all such situations. The MUCH more likely buyer is a finish-construction-and-sell-for-a-profit builder.

 

[Terrel L. Shields]

Much like using depreciation tables to establish market value of special use improvements without any sale data, eh?

yes, much the same but at least in that case you do have an idea of the total life and a straight line depreciation does not violate any appraisal standard. It is an accepted method in the absence of other data.

So you are saying the market is builders who want to move into a home themselves?

No. But it indicates the variability of the various sales you will have to work with. And it is one of many scenarios. Is the property bought by a flipper? A builder? A bank has hired someone to complete it. And if that builder had not bought it, who would? And how would you know that this transaction was a sale of a partial property. If listed and sold, how could you have known the details of the sale? LIkewise, show me some partial sales? I bet in most smaller markets you won't find one, or many, and if you do the circumstances might be wildly different. I know a sale several years ago where a nice house when built was lived in by an old guy with dogs and by the time he died, it was in terrible shape although only 30 years old. Sold for about one-third what it should have had it been maintained. But the whole interior needed gutted and windows needed replaced too. Is that a fair sale to estimate a discount? Another house near me was very good shape and sold cheap. Why? The owners many years earlier had expanded a back deck and patio. built up a patio slab over the septic tank. The tank was plugging up. Was going to have to jack hammer a huge hole while guessing at the exact location of the tank to replace the tank and run new septic line. Even estimating the cost is an issue but you could get an idea of the financial impact, does that really give you an idea of a cost for the defect? I doubt it. Again, until fixed you have no idea what the defect is actually costing you.