New Construction Reconsideration of Value

[Herb1848]

I received a reconsideration of value on a new construction appraisal I recently completed. They added $314K worth of options to the home and I have an abundance of sales that are similar, which is why there was a cut of around $37K to begin with. With adding that much in options I couldn't imagine them thinking it would appraiser to begin with. Two of the three sales the lender provided me aren't comparable at all. The third sale is, and just like my subject, they added $320K worth of options. That particular sales is an outlier compared to the rest of the sales in the subdivision. I can't speak on behalf of the appraiser who did that home, but It apparently appraised and I'm not sure what comps he could have possibly looked at or used.

I felt what I appraised it for to begin with was on the higher end of the spectrum. Since the sale provided is comparable but an outlier to the others, I wouldn't feel comfortable putting that much weight into that particular sale. How would you go about handling this reconsideration of value and how would you comment in the report.

Thank you for your help.

 

[Overimprovement]

If the one sale was very similar in the amount of upgrades, I might argue that becomes your main comp, unless you have reason to believe that selling terms were not standard.
Custom new construction is always hard to appraise though--one person may value deep blue and gold granite far more than the typical buyer.

I have done more than one appraisal that only had one good comp, the rest were fillers. All we can is the best we can with what the market provides.

Why do think its an outlier? Just based upon price? Quality can push a sale up pretty high. Curious about $320K in upgrades---what were they exactly?

 

[J Grant]

I received a reconsideration of value on a new construction appraisal I recently completed. They added $314K worth of options to the home and I have an abundance of sales that are similar, which is why there was a cut of around $37K to begin with. With adding that much in options I couldn't imagine them thinking it would appraiser to begin with. Two of the three sales the lender provided me aren't comparable at all. The third sale is, and just like my subject, they added $320K worth of options. That particular sales is an outlier compared to the rest of the sales in the subdivision. I can't speak on behalf of the appraiser who did that home, but It apparently appraised and I'm not sure what comps he could have possibly looked at or used.

I felt what I appraised it for to begin with was on the higher end of the spectrum. Since the sale provided is comparable but an outlier to the others, I wouldn't feel comfortable putting that much weight into that particular sale. How would you go about handling this reconsideration of value and how would you comment in the report.

Thank you for your help.

Without seeing the appraisal of course, but from what you posted ( what else do we have...) it is hard to figure out what you are talking about !!

What does a "cut of 37k" mean? Was the opinion of the market value 37k below the CS price?

What , roughly, is the SC price range of a house with 314k in upgrades....and what does an abundance of sales that are similar mean? the same model with an equivalent $ amount of upgrades??

Moving on to the the ROV, 2 sales sent are not similar so no problem dismissing them. Then you have a third sale which you say is just like your subject with similar (320k ) worth of upgrades, which sounds like an excellent comp.

Whether the most highly upgraded sales like this new comp or the subject are supported as being called as over improved outliers or are supported as worth the high price reflected in the upgrades idk - what $ level of upgrades did your other comp sales from builder have?

 

[shrubberyvaluation]

There could also be a difference in how the market values those upgrades of the subject compared to the other comp that had a similar cost of upgrades because they could be different.

 

[shrubberyvaluation]

Without seeing the appraisal of course, but from what you posted ( what else do we have...) it is hard to figure out what you are talking about !!

What does a "cut of 37k" mean? Was the opinion of the market value 37k below the CS price?

What , roughly, is the SC price range of a house with 314k in upgrades....and what does an abundance of sales that are similar mean? the same model with an equivalent $ amount of upgrades??

Moving on the the ROV, 2 sales sent are not similar so no problem dismissing them. Then you have a third sale which you say is just like your subject with similar (320k ) worth of upgrades, which sounds like an excellent comp.

Whether a sale like that or the subject with such a large $ amount of upgrades are over improved outliers or are supported as the high price for the upgrades idk - what level of upgrades did your other comp sales from builders have?

Maybe the 320k in upgrades is a good comp and maybe its not. Depends what those upgrades are and if the base is the same.

If the OP can find model homes (typically have all the bells and whistles) you can see how they sell compared to homes without as many upgrades even if you look further into the past.

 

[Dublin ohio]

They added $314K worth of options to the home and I have an abundance of sales that are similar

Similar options. Out of curiosity. What range of prices are we talking about. 314k of options is substantial. Not what you would see on a 500k home

 

[J Grant]

Where does lingo like a "cut of 37k" come from? We are appraisers, so the least we can do is speak the same language here - such as my market value opinion was X $ below a SC price-

 

[TerryRohrer]

The biggest problem with the great comp with similar upgrades, if it was new construction too, is that the home with those upgrades was not exposed to the market. If those are a significant part of the whole, the likelihood of overvaluing the subject is elevated. Not much different than relying on a build to suit or custom built on the owner's site, in my view. Just add the component costs together and call it a sale, then say you didn't.

 

[George Hatch]

$317k in builder upgrades usually amounts to less than $100k in upgrades if performed by a contractor after the fact. As a rule, builder upgrades are a primary profit center for these builders. Especially when considering they aren't remodeling and replacing previous finishes from the original build; they're just swapping in different components and perhaps adding some as they finish up.

 

[TerryRohrer]

Contractors absolutely salivate at the prospect of change orders. It does not matter if it is a tract house, a design build highway project, or a nuclear power plant.