How To Improve Odds Of Getting High Appraisal For New Construction Home?

[patnyu]

Hi all,

I'm new to this forum and have spent the last few days browsing. It's a very informative forum and I want to thank you all for participating here and sharing your wisdom.

I'm a landowner looking to build a house on my property. I own the land already and will applying for a construction loan. Like most people in my situation, I want to get an appraisal that is in line with, or higher than, my expected construction costs.

I know a lot of things like sales comps are out of my control, but I want to try to understand what I can do with the design to maximize the appraised value vs the construction costs. For example, I’m trying to understand if items like an in ground pool, geothermal heating or solar panels increase the appraisal? Is there a sweet spot in terms of square footage that I should target? I'm still in the early stage of designing my house with my architect, so I can still make some changes to the plans at this point.

Are there any issues you have noticed specifically with architect-designed modern homes?

I’d also like to prepare a document for the bank's appraiser that includes comps that I found myself, as well as the unique information about the house, to help the bank's appraiser understand the property as much as possible. Is that something that could be helpful or will the appraiser find it offensive that I'm trying to do their job for them?

Also, I'm planning to hire an appraiser that is local to me and understands my market, to act as a consultant and give me market-specific tips on how they would appraise the plans. Please let me know if you have any advice about questions to ask them. I'm planning to try to find someone with strong knowledge of modern homes in this particular area.

Thanks

 

[Tim The Enchanter]

I’m trying to understand if items like an in ground pool, geothermal heating or solar panels increase the appraisal?

Around here, in some areas pools are common. There is extra value, but whether it is as much as the cost is doubtful. Your area may be different. The geothermal and solar are also questionable, and hard to value. It varies by area. All RE is local so you need local advice. By all means give the appraiser what info you have. They can decide if it is any help.

Is there a sweet spot in terms of square footage that I should target?

Also market specific. At some point a house can become an over improvement. Like, if it is one of the biggest on the area. Or has extra features that are not worth their cost in the market. Like a swimming pool in Alaska, for a silly example.

 

[Restrain]

First, a pool in NY may actually be a detriment given the short usable time vs cost. Solar panels-utility companies are finding that they generate less than 10% of potential power due to snow, clouds in the winter. Best return would be a high efficiency envelope home, using sandwich panels with foam insulation to make a box that is fully insulated from the roof down. Geothermal heat/AČ is a positive.

Now, don’t overbuild for your area, don’t put in extras that don’t return value. Look at competing homes in your market (open houses, etc) and see what it out there, especially any new home builders.

Hope this helps.

 

[patnyu]

Thank you both. Very helpful tips.

Thankfully we're building in an area with comps that range from $300 per/sq ft to $800 per sq/ft and our construction costs close to around the middle of that. Much of the high cost is due to the fact that it's a large parcel, so the septic system and driveway will be expensive. But also, the house design requires floor to ceiling metal windows that are a fairly pricey item. The structure of the house will be steel beams and we will use steel stud framing, which is more commonly seen in commercial construction. The price of steel has gone up quite a bit recently so that's driven up our budget estimate a bit too. So there are some expensive "fixed" costs that drive up the cost per square foot, even though the house will generally not be completely high end.

It will definitely be a unique house, so there is not really going to be a perfect comp. Would it be helpful for me to give the bank appraiser all of the information I've gathered myself? I've already done a lot of the leg work myself and hope that it would make their life easier and also get them to notice things they may not notice otherwise. But I'm concerned that may be rude or appear like I'm trying to influence their results.

 

[gregb]

Do you have a photo or example of an "architect-designed modern home" that is planned? How common is new construction in your neighborhood, and are there other modern homes in the market area?

 

[patnyu]

Sure. Here are some examples of the architectural style of the house.

Yes, there are other modern homes in the same town. Three are for sale right now but they have been on the market for a number of months. Two have outrageous asking prices, so honestly I'm not holding out hope that they will be useful for my purposes. Do "for sale" comps play any role for an appraisal at all?

New construction is not that common. Most of the town is conserved land, so there are not a lot of buildable parcels left. From speaking to the building department, they grant about 2 permits a year. The three parcels around me are newer construction (5-20 years) and are also contemporary homes, but the original owners still live in them so I don't know have any sales comps to go by.

 

[RCA]

Hi all,

I'm new to this forum and have spent the last few days browsing. It's a very informative forum and I want to thank you all for participating here and sharing your wisdom.

I'm a landowner looking to build a house on my property. I own the land already and will applying for a construction loan. Like most people in my situation, I want to get an appraisal that is in line with, or higher than, my expected construction costs.

I know a lot of things like sales comps are out of my control, but I want to try to understand what I can do with the design to maximize the appraised value vs the construction costs. For example, I’m trying to understand if items like an in ground pool, geothermal heating or solar panels increase the appraisal? Is there a sweet spot in terms of square footage that I should target? I'm still in the early stage of designing my house with my architect, so I can still make some changes to the plans at this point.

Are there any issues you have noticed specifically with architect-designed modern homes?

I’d also like to prepare a document for the bank's appraiser that includes comps that I found myself, as well as the unique information about the house, to help the bank's appraiser understand the property as much as possible. Is that something that could be helpful or will the appraiser find it offensive that I'm trying to do their job for them?

Also, I'm planning to hire an appraiser that is local to me and understands my market, to act as a consultant and give me market-specific tips on how they would appraise the plans. Please let me know if you have any advice about questions to ask them. I'm planning to try to find someone with strong knowledge of modern homes in this particular area.

Thanks

I do these sort of appraisals. I have special methods.

But I'm in CA.

What I can say is that it depends very much on your market, on your expected buyers. Millenials are typically much different than Baby-Boomers. I would guess you are building a luxury home for a Baby-Boomer. But where in New York? Politically liberal, eco-conservative? Or dyed-in-wool Republican. DIfferent perspectives. If you analyze the subject area, assuming you have one, for the proposed property type, you will capture the clientele and those things that give the greatest return on investment. ... But at this distance, that is all I can tell you.

 

[Tim The Enchanter]

Those are def not your usual $1M tract house.
But you won't be the only one like it ever freak out oddball house either.

Which is good, because I don't think that is what you want.
That would not be an over improvement.
Gregb has a good thought.

 

[gregb]

Do "for sale" comps play any role for an appraisal at all?

Yes, "for sale" comps typically indicate what a property is NOT worth or going to sell for, depending on how many days on the market and other factors. Good question.

 

[patnyu]

Thanks all. The house is for myself and my family so I'm not focused about future buyers, except from how the bank appraiser would look at it (though I guess it's definitely not a bad idea to keep it in mind as things will always change). One thing we've already done is increase the square footage from 2200 to 2800, without adding any additional interior walls or any windows. I think 2200 would be more than enough for our family, but I was thinking 2800 would be more marketable for a house in this price range. Plus, the additional square footage would not cost as much to build as the rest of the house (with all of the fixed costs I mentioned earlier, plus kitchens, bathrooms, stairwells, chimneys, etc). This increased the total square footage by over 25% but only increased costs by about 7%, which means a lower cost per square foot to build.

It is in the Hudson Valley, about 70 minutes out of New York City. Mostly older folks, but some younger creative types and younger people with weekend homes too.

The photos in my previous post are much more expensive than the house I would be building, but the same architectural style and rural setting.

Appreciate all of the feedback.