Cost approach on over-improved new construction

[Dublin ohio]

Bueller? Bueller?

 

[TerryRohrer]

If the subject is an over-improvement you make an adjustment in the cost approach for external obsolescence.

The adjustment would be to account for functional obsolescence, not external obsolescence.

 

[George Hatch]

The CA is predicated on the property being (or projected to be) in its HBU. "Financially Feasible" (can we make a profit building this project) is one of the tests in HBU. Generally speaking, new construction is only profitable at certain points of the RE cycle. Which that's why most development occurs during the boom years and almost nothing gets built during the bust years.

If your project already won't break even then it shouldn't get built. This is one example of how the number on the bottom line isn't always the most important piece of information in the appraisal report. Telling the lender that (as proposed) the costs exceed the value is usually going to be a very significant factor in their loan decision.

 

[Tom4value]

Hello,

I am completing an appraisal on a new build of a single-family residence. The borrowers are improving raw land. The costs that they have presented do not appear to be supported in the market (sales comparison approach). The construction method they are using is not typical in the market area. Most homes are stick-built and they are building modern modular. Costs to improve raw land are extremely nuanced. Should the cost approach be completed to reflect their construction estimates?

Yes, the cost approach is definitely relevant. What you are dealing with is either functional obsolescence (is the home built with materials/features superior for the market) or external obsolescence (is the dwelling in general superior for the market).

 

[Tiffany Gibbons]

Yeah, when I read “modern modular” I envisioned truckloads of panels delivered for assembly on-site, more akin to site built , or SIPs. If typical modular I don’t see any measurable difference either.

The assembly can sometimes leave a great deal to be desired. A homeowner who had one custom built showed me additional "wood molding" they had to put in because it didn't square up on the $15,000 foundation. Just use modular cost source rating from Feddie Mac, Very Good or Excellent Quality.

 

[Tiffany Gibbons]

Hello,

I am completing an appraisal on a new build of a single-family residence. The borrowers are improving raw land. The costs that they have presented do not appear to be supported in the market (sales comparison approach). The construction method they are using is not typical in the market area. Most homes are stick-built and they are building modern modular. Costs to improve raw land are extremely nuanced. Should the cost approach be completed to reflect their construction estimates?

Did their estimates come from the licensed contractor doing the work? If so, use it, refer to the contractor's license number throughout your Cost Estimate.

 

[Surf Cat]

The assembly can sometimes leave a great deal to be desired. A homeowner who had one custom built showed me additional "wood molding" they had to put in because it didn't square up on the $15,000 foundation. Just use modular cost source rating from Feddie Mac, Very Good or Excellent Quality.

Huh....I've never been in a modular home let alone appraised one. From a show I watched, it was touted that modular home walls were built on a flat surface laying down. Thus, more square and accurate. Also, the show touted cost savings to that of a traditional site built home.

 

[Tiffany Gibbons]

Huh....I've never been in a modular home let alone appraised one. From a show I watched, it was touted that modular home walls were built on a flat surface laying down. Thus, more square and accurate. Also, the show touted cost savings to that of a traditional site built home.

I've been in some where it looks just like a stick built home, even 2 story ones, that you would not know the difference if you weren't aware going in. The difference is the rural locations don't have their own code enforcement (State in charge) but the ones within city limits won't pass the city inspector if not done right, so probably should have said the fault was with the contractors used by manufacturer, not necessarily the home.

 

[Tom D]

they put modular townhomes on the big lot across my house, big city. each floor was brought on a flatbed truck. a crane lifted the section, laid it down, then lifted the 2nd floor, so on. when a modular is done you cannot tell it's wasn't built on site. if you go into the basement, and look up at the joists, sometime you can tell in some area it's modular.

 

[Terrel L. Shields]

.I've never been in a modular home

If no one told you, you'd never know