Custom/Luxury homes

[SutnNC]

I've done them. It's not a regular thing though. This one is different given the overall project and timing (i.e., market conditions, property details and the paucity of prior two year data).

Consider the following to be true:

• The subject is a custom/luxury home. The materials are not exotic, just really/very high end.
• I requested and obtained the plans and construction costs from the architect/builder (recently completed home).
• I've networked with some reliable realtors that deal in luxury/custom homes. We're all very much on the same page.
• The subject is located in one of three subdivisions/communities that fully support it's construction (all within it's actual county).
• Two surrounding counties would support the overall scope of the project (site, frontage, views, GLA, amenities, etc.). The subject is in the "best of the three" for a property like it (which is good).
• The subject is not over improved for it's location.
• The subject is new (no other "new const", custom/luxury homes are available for use).
• For this subdivision: the median size (GLA) would be 3-5k sq ft and up to 12k+ with the subject landing on the mid-to-high point of the curve.
• Cost to build new is in excess of market value by 20%-30%
• Sales/supporting data would be from a five year period. The older I go, the better the data (of course, better "everything" from then). I am able to illustrate trends over this time period.
• Buyers will most often purchase or already have the land and "build to suit" in this subdivision (there are other homes that are more extravagant than the subject in this particular subdivision, I've been in some of them).
• The sales data, at best, is "pretty good" but would likely come across as mediocre to an average reader.
• Assume that there are decent measures of value within the market however, nothing that jumps out and says "I'm that".
• I'm charging for time not product.
• I'm not relying on guidelines or backing anything in. Assume the secondary market is not a factor.
• Assume the assett valuation thread has been closed (lol).

I want to send this one home.......what are some of the finer details that are too often overlooked for these houses (i.e., thorough/details of HBU, external/functional, diminished returns on the investment/cost, etc.; any little detail that would help to really fine tune it)? I've skimmed other threads already (some of the details apply more than others):

http://appraisersforum.com/showthread.php?t=183755&highlight=luxury+house
http://appraisersforum.com/showthread.php?t=183988&highlight=luxury+house
http://appraisersforum.com/showthread.php?t=176135&highlight=custom+homes

Grateful for the time/input, thanks-

 

[mark hurlock]

Cost to build new is in excess of market value

The east and west coast may have something in common besides ocean water.

So what is market value?

Is it the resale market of typical buyers or the new construction price contracted by a particular buyer?

 

[SutnNC]

The east and west coast may have something in common besides ocean water.

So what is market value?

Is it the resale market of typical buyers or the new construction price contracted by a particular buyer?

• Buyers will most often (if not always) purchase or already have the land and "build to suit" in this subdivision (there are other homes that are more extravagant than the subject in this particular subdivision, I've been in some of them).

I have sales from the past five years. I would be looking to get some thoughts on making an already well researched report better given the above details I suppose.

 

[residentialguy]

All depends on what you have for comps. Did you use some builder sales in the mix? Are you braketed? I usually have to go further out for extra frosting.

 

[SutnNC]

There's one builder sale in five years- the high end (borderline covered) and low (by far covered) are bracketed. This one is on the high end of the NC coastal market. I have enough data to support breaking the ceiling if that is where it falls.

MV is the traditional definition, typically motivated/informed..... (to post #2).

Given the data that I have recovered (good enough given the subject details), I'm not seeing that it's justified to go beyond that.

Reporting- like HBU, external/functional measures to further the narrative discussion with correct terminology and application (i.e., cost approach). Things along those lines. - Thanks

 

[residentialguy]

sent ya a few things. See if you can pull anything out. Good luck.

 

[SutnNC]

sent ya a few things. See if you can pull anything out. Good luck.

...I just skimmed it, great foundation. More than what I would have anticipated. - Thank you

 

[residentialguy]

Glad to help

 

[mark hurlock]

• Buyers will most often (if not always) purchase or already have the land and "build to suit" in this subdivision (there are other homes that are more extravagant than the subject in this particular subdivision, I've been in some of them).

I have sales from the past five years. I would be looking to get some thoughts on making an already well researched report better given the above details I suppose.

Contracts to build on owners land may represent a buyer to the builder but not in the context of my report. Those contracts represent “cost” of construction and I might use them to support the cost approach if needed. If the builder had existing inventory that was marketed similar to resale, I would have a different opinion.

You said your high end is “borderline covered”. Not sure what that means.

Only one sale?
Significantly superior to subject?
Too dated?
Too distant?

Is you higher end value in line with costs or is it 20% to 30% less?

 

[SutnNC]

Contracts to build on owners land may represent a buyer to the builder but not in the context of my report. Those contracts represent “cost” of construction and I might use them to support the cost approach if needed. If the builder had existing inventory that was marketed similar to resale, I would have a different opinion.

I agree...I just did one where there were five new home sales adjacent to the subject's neighborhood (the subject was very well maintained/not new and sales are kind of limited). Four of them were presales, one was a spec home. The spec home sold 8 months ago (300 dom+- with price changes) and the other four were presales (0 dom, basically entered into MLS) within 90 and 30 days (sold from effective). I used the older spec home. I mentioned all of them in the report.

You said your high end is “borderline covered”. Not sure what that means.

Of all the sales recovered, the subject is likely on the high end of that range (very likely). I have yet to see if it will meet or exceed that high end ("borderline covered").

Only one sale?
Significantly superior to subject?
Too dated?
Too distant?

Is you higher end value in line with costs or is it 20% to 30% less?

There are a couple of pretty good ones and other "not so good" ones. The "one sale" I'm referring to was a true custom built with a contract that fell through (sold 3.5+ yrs ago). The property was re-offered and sold shortly thereafter. It has a good history that I can discuss. Not superior, very dated, not too-too far, the higher end of value is still less 20%-30% of cost.