Steel Frame SFR

[Tim Hicks (Texas)]

There is a subdivision three miles from my home with steel frame home builders and wood frame home builders (all brick on slabs). The ratio is 50:50 and their is no discernable difference in the asking prices of similar size homes. Amenities do influence the pricing, but not the framing. It would seem that the exterior and interior are more important than the "bones."

 

[Wally Jones]

John,

I understand your frustration. It's something we see quite often. Many homeowner's have gone to extraordinary lengths to improve their homes with patios, pools, workshops, expensive fencing, thermal pane windows, imported tile flooring, etc. When they review an appraisal which has been done for refinancing their mortgage or for a buyer, they don't understand why a seemingly very low value has been assigned to their improvements.

Our function is normally to provide a client (typically a lender) with an opinion of current market value for a property. To do this, we analyze the current real estate market. As others have noted, most buyers don't really differentiate between construction types and most aren't willing to pay full value of an improvement. (For example, my neighbor just had a screen enclosed pool built for $35,000. Let's say he decided to sell his home. If there was an identical home across the street for sale with no pool, and his home was priced $35,000 more than the other home, he would most likely get few offers. In our particular market, buyers have demonstrated they won't pay more than about 50% of the cost new of a screen enclosed pool. Similar to driving that new car off the lot and trying to sell it next week - depreciation is a mean animal!)

My experience has been similar to those already noted. Steel frame homes in my market area are not common. Further, it is nearly impossible to identify them from exterior observation or public records. If the listing agent is aware of the construction, they may mention it in the listing. Selling prices simply do not vary much from other types of construction. As licensed appraisers, we must base our opinions on facts as presented by the current real estate market. Our clients depend upon us to be as factual as possible. So even though we can provide a detailed description of a home's construction and improvements, the bottom line for us is determining its current value within a specific market.

A detailed analysis of what it might cost to replace a steel frame home versus a wood frame might show a significant difference. But lenders want to know what it's worth to the typical buyer.

Sorry to ramble on, just trying to help you understand what our job really is. I appreciate your perspective as a builder. Let us know if we've confused you even more!

 

[Mike Boyd]

The masters of cheap are tract home builders. I have not seen any tracts in my market area that are using steel framing. If the material was cheaper, you would see special framing crews with all the expertise needed. You would also see manufactured homes with steel framing. A steel stud is much lighter in weight than a wood stud.

 

[Caterina Platt]

My market experience with steel frame homes is similar to Tim Hicks. (some days I think you and I live in parallel universes Tim! Our markets appear to be similar in many instances)

We have a subdivision which is entry level value homes. In the mid 90's, two to three builders were constructing in this development. All were what I'd call tract, production style and average to average plus quality. One builder utilized steel frame construction. He had a handful of floorplans, and set crews, so the idea was that the savings in waste and pre-engineered design would save money. All the steel 'benefits' were loudly touted by this builder.

The other two builders proceeded on with their frame homes as usual. Steel man had fiberglass tubs, vinyl flooring and laminate counter tops. The two frame builders used ceramic tile flooring, cultured marble tub surrounds, two tone stucco pop outs, raised entries, and overall had a product with better visual appeal. To this day, the market recognizes a slightly superior value in the frame homes with the decor upgrades.

Pam, George, and others have done a fine job explaining. The only thing I may add is an underline to what Greg Boyd and others have stated regarding buyer knowledge and the items for which they see more value. As others have stated, it is not the appraiser's place or call to assign value to items based on thier own personal opinions. We report the market reaction, we do not create it on our own.

In my sales experience, there are relatively few buyers who will listen intently and understand all the new and improved features of a different construction material beyond a 2-3 minute sales speil. Most, sadly, have other things on thier minds, and a relatively short attention span for the boring nuts and bolts details. You'll gain the interest from an engineer or similar personality type. That person will go home and do his own research and have a list of pointed questions for your next meeting. He/she will be the most likely candidate for assigning value to such items and opting to pay more. The average Joe is mostly concerned with the payment fitting his budget, the wife being happy with the floorplan and decor items, and will the garage accommodate his SUV.

EDIT: BTW, I've never had a lender take issue with the steel frame construction. Granted, I haven't made a huge issue or drawn considerable attention to the steel framing in my reports either.

 

[Bearslide]

We have a subdivision which is entry level value homes. In the mid 90's, two to three builders were constructing in this development. All were what I'd call tract, production style and average to average plus quality. One builder utilized steel frame construction. He had a handful of floorplans, and set crews, so the idea was that the savings in waste and pre-engineered design would save money. All the steel 'benefits' were loudly touted by this builder.

The other two builders proceeded on with their frame homes as usual. Steel man had fiberglass tubs, vinyl flooring and laminate counter tops. The two frame builders used ceramic tile flooring, cultured marble tub surrounds, two tone stucco pop outs, raised entries, and overall had a product with better visual appeal. To this day, the market recognizes a slightly superior value in the frame homes with the decor upgrades.

Pam, George, and others have done a fine job explaining. The only thing I may add is an underline to what Greg Boyd and others have stated regarding buyer knowledge and the items for which they see more value. As others have stated, it is not the appraiser's place or call to assign value to items based on thier own personal opinions. We report the market reaction, we do not create it on our own.

In my sales experience, there are relatively few buyers who will listen intently and understand all the new and improved features of a different construction material beyond a 2-3 minute sales speil. Most, sadly, have other things on thier minds, and a relatively short attention span for the boring nuts and bolts details. You'll gain the interest from an engineer or similar personality type. That person will go home and do his own research and have a list of pointed questions for your next meeting. He/she will be the most likely candidate for assigning value to such items and opting to pay more. The average Joe is mostly concerned with the payment fitting his budget, the wife being happy with the floorplan and decor items, and will the garage accommodate his SUV.

Having just read this post a day or two ago, I took advantage today of the opportunity to speak to a builder who used to build these steel frame homes here. He no longer builds them, for all the reasons stated throughout this post. He said "I can't offer the same interior candy and keep the price competitive - people want the candy and won't pay for the wrapper". So he's gone back to frame construction and ceramic floors/hardwood floors, upgraded kitchens and spa master baths. That's what the general buying public will pay for. Ties right in with what Caterina has said.