New Construction Reconsideration of Value

[Herb1848]

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?

I've done quite a few appraisals in the development and they are all really nice in their own regards. My subject is similar to others with similar upgrades, however, they are not significant. It's four pages of upgrades from extended cabinets, light fixture changes, extending the steps, and so on. My biggest concern was if the market would substantially pay more for all of those upgrades if only one sale out of 30ish is similar in the amount of upgrades. I can argue that it is a good comparable but wanted second opinions, so thank you.

 

[Herb1848]

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

700-800K

 

[Herb1848]

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-

You are absolutely correct. My "opinion of value" was $37K less than what it is selling for.

 

[Herb1848]

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?

You are absolutely right, as I corrected myself in another reply. My "opinion of value was 37K less than the sales price" The ranges of sales were mostly between 700-800K with about ~200K in upgrades Most of which are very similar in quality, GLA, BR/BA and other characteristics. I'm not arguing that I am correct in my way of thinking and could definitely argue the one comparable they provided is an excellent comparable. I appreciate the Input from more experience appraisers

 

[J Grant]

This is the reason, (among other reasons) I always, as in always, include at least 2 and sometimes 3 resales of similar to the subject recently built (if possible ) sales or listings from inside or outside the development (in addition to new home same builder comps) - regardless of our comps, we need to analyze the exposed to open market resales for contributory value.

Significant upgrades are one thing, but those weird change orders add up fast and what are they -level 2 insulation, window sill choice, plumbing pipe etc - do they really contribute later to the value ? Again the answer is sometimes yes and other times no. A series of smaller upgrades do have a cumulative quality effect of its own - which is why when builders have their model homes staged for borrowers to tour, they are usually upgraded to the max - if we later go in and see a subject base level compared to it , it can look really cheap sometimes - but again it depends on intrinsic construction quality etc.

 

[TerryRohrer]

You are absolutely right, as I corrected myself in another reply. My "opinion of value was 37K less than the sales price" The ranges of sales were mostly between 700-800K with about ~200K in upgrades Most of which are very similar in quality, GLA, BR/BA and other characteristics. I'm not arguing that I am correct in my way of thinking and could definitely argue the one comparable they provided is an excellent comparable. I appreciate the Input from more experience appraisers

Are there any sales of newer existing homes with similar upgrades? Those can be useful in gauging the actual value of upgrades, as their reported cost is largely meaningless.

 

[J Grant]

The other sh** thing in new construction beside a biblical length list of minor change orders is when builders raise prices on the next phase for the exact same models- like 3 months later they increase the base model price 5%., then the preferred lender concessions, ridiculous site premiums etc. It all is a PITA

 

[Overimprovement]

I've done quite a few appraisals in the development and they are all really nice in their own regards. My subject is similar to others with similar upgrades, however, they are not significant. It's four pages of upgrades from extended cabinets, light fixture changes, extending the steps, and so on. My biggest concern was if the market would substantially pay more for all of those upgrades if only one sale out of 30ish is similar in the amount of upgrades. I can argue that it is a good comparable but wanted second opinions, so thank you.

Are you saying most of the homes have similar amounts of upgrades but only one paid a significantly more? If that is the case, could be a bogus sale...

Could be an over-improvement for that development, or could just be the top end of the range. Some house has to always cost most. I would do as much research as I could into the one sale you are calling an outlier, since the lender is wanting you to hang your hat on that one...

If that one sale was not somehow arms length or represent market value, you will have to be able to support that too.

 

[Zoe]

$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.

That's where I think the builder DR Horton keeps it simple on new construction. They do all their own building and they only offer you very few options. They own all the lots. There are no custom builds. They own the land. They do the construction. You want it? fine You don't want it? fine.

Their opinion is you can do whatever you want after we sell it to you within our subdivision restrictions.

They almost always hire an outside management company or HOA where builder and owner are not in charge of development.

 

[TruJa]

Work on being precise in descriptions...whether writing a report or thinking to yourself.... and in appraising, for crying out loud don't use the word "feel" unless you are talking about how something objectively feels (as in temperature, soundness, texture, etc). I would second the notion of going outside this project to other similar projects (even if they are further away than preferable), and looking for comparable resales if at all possible, so that you can demonstrate with market data what multiple someone's have actually paid for similar improvements. Be prepared to spend more time searching and on the phone. Best wishes!