Cost approach on over-improved new construction

[Tiffany Gibbons]

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.

Yes, we have tons of those townhouses in the city, but those are on slab. They throw those up in no time.

 

[sputnam]

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?

It's market value. Not 'how much the borrowers are spending'. The cost data that they give you may or may not reflect typical costs for the area. If the market (and yes, the Cost Approach is.. or is supposed to be... derived from the market), doesn't support as much as they are spending, then it doesn't. It's TYPICAL BUYER/TYPICAL SELLER... not this buyer and this seller.