Builder's Model

[Alison Swain]

I have an assignment to appraise a builder's model. Looks like closeout of the subdivision and they've sold their model home, including furniture. Only two recent sales in the same subdivision are from March and are regular (non-model) houses.

What do I need to keep in miond handling this assignment?

How do I handle the age factor? The subject was obviusly built a couple of years ago --- never lived in but has seen lots of traffic?

 

[Obsolescent]

I've done a few of these and they can be a little tricky. Here are some things to think about.

1.) Location. They're typically at the front of the subdivision and have a more visiable, higher traffic location.

2) The age isn't really "new" because the flooring has been walked over, the HVAC has been running, the half bath likely used, etc.

3) If its the model with the office in the garage, then cost to cure to reconvert or functional problem for not having a garage.

4) Sometimes they're upgraded beyond what is the norm in the neighborhood.

5) Obviously, you'll have to see if you can find comps from other newer communities that sold their models. This means you'll need to go as far out as is necessary. If there are none, you may have to go back in time and develop an adjustment from another subdivision.

Hope this helps!

p.s. if the furniture goes with it, obviously that is personal property and that value should be considered separately. Also, the decorating (wallpaper, paint) should be "mainstream", but if it specialized....spanish theme, french theme, etc., then consideration of redecorating may be necessary.

 

[Judy Whitehead (Florida)]

If the subdivision is sold out, then you probably don't have to worry about a lease back arrangement with the buyer. Take a good look at the contract - sometimes the builder includes new floor coverings (due to the high traffic) and sometimes they replace garage doors if they had put in regular doors on the front. If those types of items are not in the contract, verify with the parties concerned that nothing is included and it is being sold as is.

Of course the lender is not going to want you to include any value for the furniture, but I look at that similar to the seller paying closing costs - Ignore the furniture and appraise it with the normal things that would typically be included in the sale - such as appliances, etc. Sometimes the furniture is worth a lot of money - as well as the window treatments, but you cannot typically give them any value, as the loan is for the residence and not furnishings.

As far as effective age - I tend to use the actual age, even though someone didn't sleep there it sure got lots of use during the time it was standing there.

 

[Alison Swain]

Thanks for the replies so far. Very helpful. This particular builder builds everything well and all units are built with the same quality features -- therefore, they don't customize. Quality should be the same throughout the community other than decor.

 

[Mztk1]

There should be a separate contract/itemization for the furniture. If the lender doesn't have it ask the sales office and if that fails call the builder's corporate office. Sometimes this number is backed into the sale price, other builders are careful not to include it.

Window treatments and any item that matches the treatments are typically left "at the convenience of the seller" and do to add to the sale price.

The report may have to be subject to a garage conversion.

For condition, it is definately not going to be in as worn condition as a house lived in for two years. Yes, the carpets have higher traffic, but the stove and other appliances were not used, there is less chance for dents and scratches. Pay attention to things necessary for living but not for a model, like, Does the stove actually work? The hot water heater? Is the dishwasher hooked up? Do the toilets and showers work? Is the outside to the same quality as the rest of the neighborhood or did they skimp there. Buyers looking a model do not typically walk around the house so you usually get the standard number of hose bibs, limited gutters (if any) and things like that.