New Construction Reconsideration of Value

[George Hatch]

The irony is that 5 years from now there won't be any price differential to speak of between the big upgrades vs the standard buildouts.

 

[sputnam]

You consider the additional data and respond professionally and in writing. Try to avoid the attitude that some appraisers seem to have...'I'm the appraiser. I don't make mistakes. Leave me alone.' Actually consider whether the market would support the additional value... and if it will, admit it. If it won't, then explain why the additional data provided as part of the RoV isn't as relevant as the data you presented in the appraisal report.

 

[J Grant]

It sounds like ( given that the OP explanation was spotty),. it sounds like the OP used model match or similar size model homes as comps with around 200k in upgrades, the subject has over 300k in upgrades, the client forwarded a comp sale the OP did not use, apparently same model match with over 300k in upgrades. The OP called that sale with a higher price an outlier but it might be the best comp and an indicator the market is paying for that level of upgrades - at least when new. The challenge then is to find out is the resale market returning $, and if so how much, for the house with a high level of builder upgrades. Just because a client sends only one sale in an ROV does not mean we cant'; add another one if it better supports a value change ( if we change the value ).

I do not use $ for $ the amount of builder upgrades but rather the contributory value I can see in the market. Imo an additional 100k of change order upgrades might not return 100k, but I doubt it is zero contribution either. How much of that extra, atypical 100k more is an over improvement and how much the market might return as a resale is the challenge of the assignment.

 

[Tom D]

you ain't being paid enough for this land mine appraisal. if i put you on the witness stand, i am going to ask you how you determined the comps upgrades & amount, and how did you determine cost verses value on each item. that is sorta what the state will do when one party of the deal complains to them about your value. you can determine small upgrades, but $300,000. your work file better be a couple of inches thick with proof of every adjustment determined and how. i know there are braver appraisers here than me, but i have survived for a long time knowing when to realize the danger you have in that appraisal.

 

[J Grant]

you ain't being paid enough for this land mine appraisal. if i put you on the witness stand, i am going to ask you how you determined the comps upgrades & amount, and how did you determine cost verses value on each item. that is sorta what the state will do when one party of the deal complains to them about your value. you can determine small upgrades, but $300,000. your work file better be a couple of inches thick with proof of every adjustment determined and how. i know there are braver appraisers here than me, but i have survived for a long time knowing when to realize the danger you have in that appraisal.

Imo this is silly. Very few appraisers ever get to that dreaded imaginary witness stand scenario. Most board complaints based on value go nowhere btw. Whatever our opinion of MV is, we need a work file and support for it. It is harder for an appraiser to increase a value opinion in an ROV because it might expose them to more scrutiny to the UW, but if an appraiser truly missed the good comparable then they/we need to be brave and do what the market indicates.

 

[JeffSH]

I would think the sale they gave you with 320k in upgrades is the most similar to your subject and has the smallest gross adjustment? Why didn't you include the sale originally?

What are the upgrades? Do they have general appeal, or are they more specific to the buyer?

If there's data to support $320k in upgrades, then there's data to support $320k in upgrades. One comp is data. You can't just call it an outlier because it's on the high-end.

If there was just one more $320k comp, then you would appraise the subject differently?

Are there any homes under construction with similar upgrades?

This is a tough situation and without the actual appraisal and data, you won't get the best answers.

If the upgrades aren't unreasonable (pond in the backyard, car-lift, elevator, etc) then I probably wouldn't come in low.

 

[JeffSH]

It sounds like ( given that the OP explanation was spotty),. it sounds like the OP used model match or similar size model homes as comps with around 200k in upgrades, the subject has over 300k in upgrades, the client forwarded a comp sale the OP did not use, apparently same model match with over 300k in upgrades. The OP called that sale with a higher price an outlier but it might be the best comp and an indicator the market is paying for that level of upgrades - at least when new. The challenge then is to find out is the resale market returning $, and if so how much, for the house with a high level of builder upgrades. Just because a client sends only one sale in an ROV does not mean we cant'; add another one if it better supports a value change ( if we change the value ).

I do not use $ for $ the amount of builder upgrades but rather the contributory value I can see in the market. Imo an additional 100k of change order upgrades might not return 100k, but I doubt it is zero contribution either. How much of that extra, atypical 100k more is an over improvement and how much the market might return as a resale is the challenge of the assignment.

The resale market is often irrelevant when you're doing new construction. Why does it matter what the home will sell for down the line if five people are building similar new homes at a similar cost? Sometimes there are no resales.

It's shocking what people are paying for new construction, but if there are people lined up to put in offers, then who am I to come in low? It doesn't make sense. I wouldn't buy a new home. But it is what it is. My brother is in the market and he is only interested in new construction.

 

[George Hatch]

Agree completely. Regardless of the (from our perspectives) wisdom of these market participants their actions are what they are.

 

[JeffSH]

I just imagine that we've all had new construction appraisals where we say, "Wow, they're paying $500k for this!?!" and then the builder sends you five model match comps at a similar price.

Gotta separate your personal biases. This is a difficult situation though. Does 1 sale constitute a market?

 

[J Grant]

The resale market is often irrelevant when you're doing new construction. Why does it matter what the home will sell for down the line if five people are building similar new homes at a similar cost? Sometimes there are no resales.

It's shocking what people are paying for new construction, but if there are people lined up to put in offers, then who am I to come in low? It doesn't make sense. I wouldn't buy a new home. But it is what it is. My brother is in the market and he is only interested in new construction.

What they pay new is price, what a house commands one month later in a resale speaks to the value returned in the open market. If we just rubber stamp the builder's own sale prices, why get an appraisal done?