New Construction

[Surf Cat]

I actually find new construction much easier to do and therefore, I never charged more except where they asked me to include the cost of a final inspection.

I agree when everything goes smoothly and you get everything you need.

I have found a lot of times, the Builder doesn't provide the materials list and cost breakdown. They feel that they're done once they give you the plans. Without the materials list and cost breakdown, you don't know if you're dealing with Home Depot builder grade or custom high-end quality materials.

 

[Terrel L. Shields]

have found a lot of times, the Builder doesn't provide the materials list and cost breakdown.

Our builders are usually eager to get the property sold and get it rather quickly. It is a little more time consuming to deal with a custom home where the builder is working with a homeowner contracting their own construction. We have a number of builders whose techniques and materials are pretty much cookie cutter- only varying the footprint. I know they use a combination of tile and carpet. That a brother does the brick work, they do the slab and framing, and a certain company does the roofing. The plumbers will always be the same, electricians the same and same quality of vinyl windows and cabinets. And that applies to about 9 of 10 builders here. These are local builders. Horton came to town recently and from everything I see, they are the cheapest build around - but there are only a couple of builders who actually build the top quality, plus one who promotes himself as top shelf but every house of his I see seems to be seriously lacking in quality specs. One house for a doctor they wanted bookshelves on each side of the fireplace and a pellet stove supplemental heat in a rear den room. The shelving was cheap, pantry level work, painted white, and the pellet stove flue was stuck in the middle of the room and outside extended 10' up to get higher than the upper half-story. Poorly thought out. Then there was a flat space on top of the entry that then opened into a great room. It was a dead bug and dirt collector. Looked terrible from the upper loft area.

 

[Surf Cat]

Our builders are usually eager to get the property sold and get it rather quickly. It is a little more time consuming to deal with a custom home where the builder is working with a homeowner contracting their own construction.

Here in Southern California, depending on which area you're in, the materials cost breakdown tells the story of whom the Builder's target market participants is going to be.

Inner city builders can get a whole kitchen done for 20-30K. Get close to the ocean, it's 20K just for the marble countertops.

Thus, the plans along with the cost breakdown tells you which sales you're going to be targeting for your prospective opinion.

 

[Tom D]

A way for an appraiser to learn how to do more challenging assignments is for to do a "mock assignment" appraisal. Such as replicate the specs on this assignment ( a vacant lot, and plans to build a house ) decide on the size of the house, 2500 sf or whatever, and do an appraisal, with no client. We'd be happy to review it on the board !

When i first started in the cave days, i worked under an MAI. He took me to my first house, walked thru it and kinda gave me the essentials. After that, all my appraisals were a moc assignment in terms of doing #2, $3, #4, etc, by myself. Sorta thrown into the pool of appraising. That's when i hand wrote the 1004 with it's 1 polaroid picture. I'm sure his staff person know how to make it an acceptable report.

Later, more experienced, oh did i love getting those lists of construction changes during the construction to add/subtract from the appraisal. Fee not included.

 

[Zoe]

I am sorry the others are so negative. But no, it is not an extraordinary assumption. It is a hypothetical - contrary to what exists.

The report is subject to completion.

Using the plans and specs you can compare it to new houses. Newer construction, to me, means the cost approach on every assignment. I do it religiously. And buy a cost book (Craftsman are cheap and have a computer program built in) Use the cost approach and the owners estimates to compare value the improvements. Use and know what EP is (Entrepreneural profit) Use vacant lot sales to value the site value. Estimate the amount of time it should take to build in the comments. Use new sales, as new as you can find, for comps. No income approach.

you will never learn to value new construction by declining. Get some help and even if you give them the entire fee, you can learn from someone else with more experience.

They should not have told them to decline. It is not that complex with plans and specs. Go Terrel...........

 

[Tom D]

I never do the cost approach, ever. Buy having said that, if you do it you do it the way terrell does it. Cause the state's no 1 money maker from appraisers is their work file not having any data on how they got the cost and land values. Then they fine you to death on that, and all the other little mistakes you made.

Now, i'm big urban speaking for big old urban. But poster, if not able to do all of terrell's way of doing cost approach, prevented an existential threat to his license if he tried the cost approach. If there are a lot of new/newer built homes, then plans & specs can be done easier.
By the way, i get paid the same, or more, than you cost approach perfectionist probable get. And no no cost appoach complaints.

 

[Mark K]

Indiana needs to start building, lots of people need homes.

They are building but mostly the low quality cookie cutter Lennar or DRHorton type of home in subdivisions on small lots.

If you want a decent quality home you have to build custom. A lot of these custom homes are being built on nice lots with tear-down old houses.

I'd suggest the OP learn to appraise new construction. I did a LOT of those back in the day. I loved them. Drive up, take a couple of photos of the lot, and you're on your way. The OP's situation might have an additional wrinkle in that he needs to find out if the new house will use the existing well/septic and be sure to have bids/plans/spec sheets for everything. Nothing that can't be worked thru.

 

[J Grant]

Get the lender involved if the builder does not give you a budget/cost breakdown. If a builder learns the appraisal is stalled and loan won;t close , they hand it over in a hurry. I am more interested in the overall budget then what a countertop cost. Though the materials used for major features are an indication of quality -

The builder budget is great because it is what it is , not our job to prove it right or wrong. However, if their budget varies wildly from our cost approach ( if we do one ), it can be pointed out. A cost approach done by an appraiser is, in most cases, not expected to be used for actual building detail; it is done for valuation purposes as a check and balance on a builder's budget and to extract a land estimate value.

Having a builder budget/cost approach can indicate if the subject is equivalent quality to other homes of its type, age, and location, or if it is an under-improvement or super adequacy.

"Builder budget estimate for total dwelling, $1,200,000. Appraiser cost approach estimate is $1,100, 000. The appraiser cost approach is an estimate based on a national cost table and local profit norms, done for valuation purposes only. An actual builder cost can vary per individual contractor."."

Builders or contractors will give different estimates even for same size and materials house. Because they can use different sources, pay their crew differently, and apply different profit add-ons.

 

[sputnam]

Get the lender involved if the builder does not give you a budget/cost breakdown. If a builder learns the appraisal is stalled and loan won;t close , they hand it over in a hurry. I am more interested in the overall budget then what a countertop cost. Though the materials used for major features are an indication of quality -

Yep. If full plans and specs are not provided, I tell the Client that the work is on hold until I have them. If they choose to cancel and find another appraiser, I don't lose any sleep over it. I personally don't care much about the builder's budget if it's for a market value appraisal. I want the market to tell me how much the imrprovements should cost... not the builder who has a vested interest in the project.

 

[Joe Flacco]

What exactly is "full plans and specs"? What amount of information qualifies?