Steel Frame SFR

[Mountain Man]

Steel is not cost efficient enough to use in residential applications. The price of steel has gone up, and the labor for engineering and instillation is too expensive. Besides that, the residential market has many, many other pre-engineered products, trusses, and framing systems that are much more cost effective and easier to install in residential uses. However, the reason we use steel in commercial construction is for engineered strength, weight, and the ability to run looooong spans that conventional construction can't.

As for steel outlasting wood.... hog wash!!! As a retired firefighter, I’ve seen what heat and exposure stresses can do to steel. I’ve worked many fires where we’ve saved historic timber framed structures, and have seen them rebuilt in short order. But I’ve yet to see a steel building that was substantially damaged be rebuilt . They are pushed over into a scrap heap, razed for new construction.

Overall, I don’t know of one lender who will touch a loan on a steel framed house, the buying public (what we call the market) doesn’t show any interest, and I don’t have any subs who have the knowledge nor would be willing to work with steel. If I pulled up on one of my job sites and told them we are using steel, they’d up and leave.

 

[CANative]

Many, if not most, people make emotional decisions when buying a house. Houses that are unique, unusual, not easily comparable appeal to fewer buyers.

I've appraised several steel homes, reviewed the appraisal reports on purchases of a couple and know of about a half dozen I've used for comparables. The ones I've appraised are "kit" homes like the ones marketed by TriSteel. Both had steel siding and steel roofing. A third one I did was an Austrailian kit home with steel framing. But it was bizarre. Weird concrete board siding and fiberglass interior wall partitions.

I don't see ANY evidence that a steel house would sell for more than a conventional house when quality and appearance are similar. If it's a kit house and has an unusual design or finish, it might even sell for less than a similar size home.

Here are a couple of examples of the steel homes I've appraised..

Tri-Steel Kit


Australian Kit (designed to resist wild fires)

 

[Bearslide]

I've appraised a few of the steel framed homes - typical 2 story design. There has been no appreciable difference in resale price, and like everyone else has said, they seem to always be rural.

The only market reaction I have seen is from the realtors...........all of a sudden, MLS sheets are showing up proclaiming "this is not a double-wide - it is a steel framed home" - and in the picture it is clearly a double-wide. One realtor even shot the pics of them delivering it - in two halves.

 

[Liz Mura]

Years ago in Phoenix, all homes were built out of block or brick. Wood frame was unheard of....termites, ya know! Then the masses started pouring into the area and faster and cheaper construction was the way to go. At this point in time, I have seen no market difference between frame and block homes as far as selling prices go. Will the block/brick homes last longer? Probably, but the typical buyer plans on staying in the home a few years then moving on...not staying there the rest of his life. The "quality" most buyers are concerned with is upgrades such as flooring, cabinets, counters, etc. They seem to care much less what's between the inside and outside walls. I see many HOs who point out to me that they have 2 x 6 construction and expect the typical buyer to pay more for that. Even in this climate, I've yet to see that happen either. I would expect to see the same reaction with a steel frame home.

 

[John Friendly]

Thank You

I have been watching this forum since the question was posted and find the comments very interesting to say the least. Let alone the responses come from "Certfied Appraisers" that span from One End of the Country to the Other. This is very helpful information.

These responses leads me to ask :

What "Standard of Measure" is used in the field of Appraisal to Valuate a SFR or Commercial building ?
Is it documented anywhere and available to the public?

As posted previuosly,it clearly sounds as if "Buyers" and "Appraisers" are only concerned with what the "Superficial Appearance" of a property shows.
This concept puzzles me.

I find this to be an "Amazing" position for Anyone to take based on a few reasons that I will mention here :

To begin with,

I find that there is a "Standard Set of Rules" for "Valuation" of SFR and Commercial building construction, clearly based on what is stated in the "Building Code" that "All Construction Practices" are supposed to be held to.
This statement is based on what the 1997 Uniform Building Code says in reference to Chapter 6 "Types of Construction"-Section 601.1 and section 601.2 along with 601.3 (STANDARDS of QUALITY) and section 601.4 (Structural Frame)

Clearly there seems to be a "Tested and Proven" difference in the "Fire-Resistive Qualities" of multiple types of construction when it is considered there is a State and Local Government documented Rating System" that states :
Type 1 Construction" being "The Most Fire-Resistive QUALITY" (602.1 by Definition-The Structural elements in Type 1 Fire-Resistive buildings shall be of STEEL, Iron, Concrete or Masonry) versus "Class 5 Construction" which is considered "The LEAST Fire-Resistive QUALITY" (606.1 by Definition- Type 5 Buildings may be of Any Materials Allowed by this Code.Type 5 One-hour buildings Shall be of One-Hour Fire -Resistive Construction throughout.)
Materials of construction and fire-resistive Requirements shall be as Specified in Section 601.

Now if you are still with me here, I will refer to the 2003 International Residential Code which has yet to be fully adopted throughout all jurisdictions but is in process of being made "The New Standard of Construction Internationally."
Chapter 3 Building Planning Section R301.1.3 Engineered Design
When a building of otherwise conventional construction contains Structural elements Exceeding the Limits of Section R301 or otherwise, not conforming to this code, these elements shall be designed in accordance with "Accepted Engineering Practice." The extent of such design need only demonstrate compliance of Non-Conventional elements with other applicable provisions and shall be compatible with the performance of the Conventional framed System. Engineered design in accordance with The International Building Code
is Permitted for All Buildings and structures, and parts thereof, included in the scope of this code.
I need to add one more thing in reference to Chapter 1 Section R101.3 Purpose of the Code-
The purpose of this code is to provide Minimum Requirements to Safegaurd the public Safety, Health and General Welfare through Affordability,
Structural Strength, Means of Egress Facilities, Stability,Sanitation,Light and Ventilation, Energy Conservation and Safety to Life and Property from Fire ond Other Hazards Attributed to The Built Environment.


Ladies and Gentlemen,

It appears to me by the statements posted in response to my original question, the "Opinions" expressed regarding the "Market Value" of a SFR or Commercial building are "Skewed" for some reason.
Apparently "Value is Based on Superficial Materials" used in the final stages of building construction. When this is considered to be "The Standard of Value" at least we all can say, "The people and things we Loved and Valued most were Lost, but at Least They were in a Higher Quality Appearing Environment that Cost More money when they suffered the Consequences of "Lesser Quality Construction."
Keeping the "Professional Status" of all those responding in mind, I personally can only Hope that people who are directly involved in
the field of Appraisal make an effort to contact
the local branch of the "ICC aka. International Code Council and Formerly known as the ICBO aka. International Conference of Building Officials" in order to find out where the nearest location is that offers "Sanctioned" training in the Field of "Combination Building Inspector Education" for the
single purpose of developing an understanding of what is and is not "Required" in the field of Construction in order to have a better concept of Building Value.
I do Completely believe that if people involved with the Profession of Appraisal were better educated in what the "Standards of Building to Code" are, Everyone would be Better Served on Many Levels.

Thank You All

 

[Pamela Crowley (Florida)]

OK, just some basics here. Cost does not equal value.

What Definition of Value are you looking for? If it's "Market Value", the primary definition used in residential is on all the Fannie Mae appraisal forms and here it is:

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, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus.

Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: (1) buyer and seller are typically motivated; (2) both parties are well informed or well advised, and each acting in what he considers his own best interest; (3) a reasonable time is allowed for exposure in the open market; (4) payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and (5) the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions* granted by anyone associated with the sale.

*Adjustments to the comparables must be made for special or creative financing or sales concessions. No adjustments are necessary for those costs which are normally paid by sellers as a result of tradition or law in a market area; these costs are readily identifiable since the seller pays these costs in virtually all sales transactions. Special or creative financing adjustment can be made to the comparable property by comparisons to financing terms offered by a third party institutional lender that is not already involved in the property or transaction. Any adjustment should not be calculated on a mechanical dollar for dollar cost of the financing or concession but the dollar amount of any adjustment should approximate the market’s reaction to the financing or concessions based on the appraiser’s judgement.

With that information, we are dealing with 'typical' buyers and sellers and what their motivations are. If there are two almost identical houses, right next door to each other, but one was built with the steel construction you are using and the other was built with the conventional wood frame construction, all else being equal, what would the 'typical' buyers in that particular market pay for either one?

I'm old enough and experienced enough in real estate and residential building to know and understand the differences in the 'bones' of a house and the difference that can make in the long term. BUT, we have become a very mobile society that moves much more often now. I believe the majority just do not care that much about the quality of the construction since they are going to move again in a couple or few years anyway. What I see in the residential real estate market today is that the visuals are very important and they don't really care what it covers up as long as it looks good and they can have a little 'bragging rights' to show off about.

So, some will pay more for the covered up bones on initial construction, but I also notice those will often sit on the market for sale for a much longer time until they reduce the price to very similar to what the quality of construction is around them.

If you want to build something with higher than typical quality of construction as compared to what is typical in that particular market, be prepared to pay more, but not be able to get that difference back.

It's the 'typical' buyers in that particular market that tell appraisers what the value is. That is the 'market value' of any given property for the 'market value definition'.

I hope you understand this. It's also frustrating for appraiser that do recognize the difference, but upon research find that the buyers in that market don't see it and won't pay for it.

 

[Bearslide]

Excellent explanation, Pam. That explains it quite nicely. Bravo! Sad, but very true. The market supports fluff more than substance.

 

[CANative]

My house is wood frame construction and has been here since about 1880. 125 years or so. Even if a steel frame building could be expected to last 200 years, why would I or anyone else care?

If I want to add a room addition, I could just tear out a wall, frame in the addition, wire it, plumb it, add roofing and siding and I'm done. How easy is it to modify an engineered steel building?

If my house burns down, the insurance will buy me a brand new one.

Everyone I know has a wood frame house. Everywhere I look there are wood frame houses. They all seem to be holding up pretty well and are comfortable and safe. What would motivate me to pay more for some "new fangled" thing that hasn't had time to prove itself yet?

Can I get my tenants in my rental properties to pay more rent because the rental unit is an engineered steel building?

The market supports fluff more than substance

How much more "substance" does the typical buyer need in a house that will probably last longer than he/she will live and almost certainly longer than most people stay in the same house?

I also don't think it's a matter of fluff over substance. Steel houses are just weird (as in not typical.) Atypical properties are more difficult to sell.

 

[Bearslide]

I also don't think it's a matter of fluff over substance. Steel houses are just weird (as in not typical.) Atypical properties are more difficult to sell.[/quote]

Sorry Greg - I wasn't clear in what I was referring to - what I meant was the market (at least ours) doesn't recognize quality construction - what sells is "fluff" - ie, interior eye catchers - columns, 2 story foyers, eye catching hardwood in foyer, etc. Typical buyers are looking at appearance, not construction quality. That's what I meant by "fluff".

 

[CANative]

Agreed!

I can't understand this latest fad with granite kitchen counters. People are even putting them in little old cracker boxes in the icky parts of town.