New Build

[litch96]

I have a custom new build that is in an area of no new home sales. Would need to go 50+ miles for new builds but would tract homes not custom builds. Don't really want to include the sales approach as I believe this would be misleading. So I am looking for comments to include. I don' think I am stating enough for the reader of report.

 

[J Grant]

I have a custom new build that is in an area of no new home sales. Would need to go 50+ miles for new builds but would tract homes not custom builds. Don't really want to include the sales approach as I believe this would be misleading. So I am looking for comments to include. I don' think I am stating enough for the reader of report.

I am not familiar with a res appraisal being acceptable without the sale comparison approach-

If there are no newly built home sales, then use what you have - recently built/similar homes and adjust for depreciation - an older home can also be renovated to an almost new condition. (those make great comps ) The cost approach is normally a supporting value -

 

[Tom D]

The main problem, maybe, is this sale price the new high number in the area. I wouldn't do it if it is, not worth the aggravation and stips that you will suffer from it.

 

[litch96]

Not a sale the homeowner had it built for himself, this is a refinance. The house was completed in July 2024. Lender is a local bank and will be an inhouse loan

 

[BRCJR]

Complete Sales Comparison with the best you have.
Complete the Cost Approach with great due diligence.

Place proper emphasis on the approach deemed most reliable. Many may disagree with me but, I do not always consider the Sales as most reliable. It depends upon the quality of the data.

A new(er) construction is the very time a Cost Approach is applicable and very well can be necessary for credible results.....

 

[J Grant]

Complete Sales Comparison with the best you have.
Complete the Cost Approach with great due diligence.

Place proper emphasis on the approach deemed most reliable. Many may disagree with me but, I do not always consider the Sales as most reliable. It depends upon the quality of the data.

A new(er) construction is the very time a Cost Approach is applicable and very well can be necessary for credible results.....

I disagree with ou if it is a market value purpose appraisal.

The fundamental principle of appraising is cost does not always equal value. If a person spends 400k for the lot and 600 k to build new, an outlay of $1,00,000/ How can you form an opinion of its value, , if the owner tried to sell it tomorrow without seeing what similar homes sold for (and are listed for - the competition)
That home might get 900k in the open market, or one million, or $1,200,000.

 

[J Grant]

Complete Sales Comparison with the best you have.
Complete the Cost Approach with great due diligence.

Place proper emphasis on the approach deemed most reliable. Many may disagree with me but, I do not always consider the Sales as most reliable. It depends upon the quality of the data.

A new(er) construction is the very time a Cost Approach is applicable and very well can be necessary for credible results.....

If we base the value on the cost approach, why does the lender need an appraisal? They can just get teh land sale price and the cost to build from teh contractor and add them up.

If the purpose of the appeals is market value opinion, then it has to be based on sales because the MV definition is predicated on a "sale" of the subject-

DEFINITION OF MARKET VALUE: The most probable price which a property should bring in a competitive and open
market under all conditions requisite to a fair sale, the buyer and seller, ...( the resto f the definition follows )

 

[CGinMN]

Can you develop credible assignment results with only a cost approach? If so, how would you go about estimating functional and external obsolescence + entrepreneurial incentive without analyzing sales?

Your client will want to see the sales comparison approach. You should select sales that are most competitive to the subject. That could mean analyzing sales from 2-3+ years ago and/or sales that are not newly built but that are in the immediate market area, then adjusting for age/depreciation. I would be going back in time before traveling 50+ miles to analyze tract homes, unless this is a very remote area and the subject is a custom home in a tract development. I would be searching county records and building permits for new constructions that have occurred within the past 10 years. You might find some non-MLS sales, and at the very least a list of non-sold/new built homes that could help demonstrate whether there is a market for this type of property.

 

[KHS445]

I recently had a similar situation on one of the popular local lakes. Borrower had bought the property several years ago, for a then unsupportable price. Very small lot, with the house taking up almost 100% of the buildable area and the drain field needed to be located across the road on a neighbor's property and the supply line will be jetted under the road. Construction costs including a lot of higher end finishes was approaching $1.5 Million. Was able to support the land costs, using Marshall & Swift was able to nearly support the construction costs and also did the sales approach while admitting none of the sales were really comparable.

Discussed it my client and they said we are going to make the loan, so complete the appraisal and let the chips fall where they may. In my reconciliation I relied heavily on the cost approach and said, if this is what you want, and this is where you want it, then this is what it is worth.
Client accepted the appraisal with no comments and construction began last week. Dealing with non-AMC local lenders is great.

 

[J Grant]

The fact that within 50 miles ( and closer, 10 miles) the OP found NO newly built custom homes of whatever size the subject is also is data - it means there is low demand for that kind (whatever it is, no info on size and quality) , that means low demand in the market area for a custom new home-

Especially if there is ample vacant lots and vacant land ( or cheap tear down houses for a lot ) if there is vacant lots aabilanbe, why are;t people building new custom homes on them...

When there is demand, and buyers want it, they build it. In my area, as it became more affluent, I saw more and more custom spec luxury homes - and within time, they go on the open market as resales. nioo ohes im nomo