TAF and USPAP - great analysis

[Zoe]

Chances of single family residential development are slim on H&B use analysis.

 

[RCA]

Why on earth would a house cost $4,500/SF? Carpenters being paid $500 an hour? Foundations imbedded into the soil 25'? I know permits in CA can cost more than my house cost to build, but that is absurd.

Well this was from Ben Heinrich at the AI Monterey conferenc on Friday. The listing is "0 Casanova 7 NW of Ocean, Carmel,CA". (Note nowadays in Carmel many homes do not have published addresses ....). it is:

Beds: 4
Baths: 4/1
Primary SF: 2,202
Addt'l SF: 570
Total SF: 2,772
Addt'l Type ADU
Approx Lot: 6,288
Age: 0/223. (New construction)
DOM: 11
LA: Ben Heinrich
List Price: $10,700,000
Sale Price: $10,700,000

10,700,000 / 2,202 = $4,859/sf. (Primary GLA)
$10,700,000/ 2,2772 sf = $3,860/sf (Including ADU sf)

MARKET VALUE

 

[Fernando]

Yeah you would definitely have to start looking at 10-20 story hotel and restaurant with pier overlooking the ocean and marina if it has a bunch of water frontage on the ocean in some parts of California. Golf course? The list goes on with H&B use analysis.

H&B use to spend $4,500/sf. I don't think so.

 

[Fernando]

Well this was from Ben Heinrich at the AI Monterey conferenc on Friday. The listing is "0 Casanova 7 NW of Ocean, Carmel,CA". (Note nowadays in Carmel many homes do not have published addresses ....). it is:

Beds: 4
Baths: 4/1
Primary SF: 2,202
Addt'l SF: 570
Total SF: 2,772
Addt'l Type ADU
Approx Lot: 6,288
Age: 0/223. (New construction)
DOM: 11
LA: Ben Heinrich
List Price: $10,700,000
Sale Price: $10,700,000

10,700,000 / 2,202 = $4,859/sf. (Primary GLA)
$10,700,000/ 2,2772 sf = $3,860/sf (Including ADU sf)

MARKET VALUE

You should take out land value before considering $/sf to build.
When I was in Asia, they consider $/sf and I didn't know what they were talking about. We don't talk $/sf in terms of valuation.
Recently Steve Job's wife bought most expensive home in SF for $90,000,000. That's more than $5,000/sf.

 

[RCA]

That's nothing, I have another one.

26405 Scenic Road, Carmel, CA
Primary SF: 2,933 SF
Lot: 7,585 SF
Sold: 3/18/2024
Price: $15,250,000
Age: 41 years

$15,250,000/2,933SF = $5,199.45/SF

This one, though, has a nice view overlooking the ocean, near the beach.

From the MLS:

"This immaculately renovated oceanfront beach house located on the highly sought-after Carmel Point section of Scenic Road features unobstructed panoramic views of both the Santa Lucia Mountains and rugged Carmel Coastline. The upfront and jaw-dropping views of River Beach, Stewarts Cove, Point Lobos, and the Fish Ranch, are all visible throughout the spacious, high-beam ceiling living room and gourmet kitchen. Adding to the ambiance of this coastal-living masterpiece is the welcoming, interior courtyard, a large warm fireplace, and the entire second-story primary bedroom retreat at the top of the storybook, circular staircase. With 4 spacious bedrooms, 4 bathrooms, ~2,933 square feet of bright and vibrant interior space, upstairs and downstairs laundry rooms, and outdoor living areas spread across an extra large 7,585 SqFt lot, this property boasts the rare combination of space, views, proximity to town, easy access from the south end of Scenic, and living right at the beach with all the luxuries of a modern, high-end home. This is Carmel Point living at its finest."

 

[Fernando]

That's nothing, I have another one.

26405 Scenic Road, Carmel, CA
Primary SF: 2,933 SF
Lot: 7,585 SF
Sold: 3/18/2024
Price: $15,250,000
Age: 41 years

$15,250,000/2,933SF = $5,199.45/SF

This one, though, has a nice view overlooking the ocean, near the beach.

From the MLS:

"This immaculately renovated oceanfront beach house located on the highly sought-after Carmel Point section of Scenic Road features unobstructed panoramic views of both the Santa Lucia Mountains and rugged Carmel Coastline. The upfront and jaw-dropping views of River Beach, Stewarts Cove, Point Lobos, and the Fish Ranch, are all visible throughout the spacious, high-beam ceiling living room and gourmet kitchen. Adding to the ambiance of this coastal-living masterpiece is the welcoming, interior courtyard, a large warm fireplace, and the entire second-story primary bedroom retreat at the top of the storybook, circular staircase. With 4 spacious bedrooms, 4 bathrooms, ~2,933 square feet of bright and vibrant interior space, upstairs and downstairs laundry rooms, and outdoor living areas spread across an extra large 7,585 SqFt lot, this property boasts the rare combination of space, views, proximity to town, easy access from the south end of Scenic, and living right at the beach with all the luxuries of a modern, high-end home. This is Carmel Point living at its finest."

Your $/SF is meaningless. Take out the land value.

 

[RCA]

Office real estate in Tokyo at one time, long, long ago (1989), sold for $139,000/sf. This led to estimates that the Imperial Palace was valued at $5.1 trillion - more than the GDP of Japan at the time.

How much was the Japanese Imperial Palace worth? - Blog - Amaral Lab

amaral.northwestern.edu

 

[RCA]

That's is the way the real estate agents value it. You should know. There is nothing wrong with Total Value/SF GLA - agents, sellers and buyers think that way. E.g. Ben Heinrich has been in the area for 20+ years -- and that is how he stated it at the conference. And, I am sure all those attending knew exactly what he meant.

 

[George Hatch]

I don't really see how this breaks down to an either-or choice. We CAN do more that we've been doing but so far nobody wants to actually buy more.

Lots of appraisers have written up more comprehensive demonstration reports, but there is no market for appraisals performed at those higher levels of quality and content. Not at a fee that justifies an appraiser putting in that much time/effort. The reason more appraisers aren't selling demonstration-report isn't because they can't appraise at that level; it's because nobody wants that level enough to pay for it. Refer to tagline below.

Isn't that what annoys both of you so much? That when operating in the mtg lending market for SFRs your competition gets paid the same for what they want to sell that you get paid for what you want to sell. For most appraisers the market-based ROI for the superior alternative doesn't economically justify the additional time/effort it takes to do one.

It seems we have two visions here

If you build it they will come​

vs​

If they want it we can build it​

​

The reason most fee appraisers are going to wait until their appraisalware vendors include such alternatives in their subscriptions is the same reason most appraisers don't buy new PCs every year. It's more profitable to wait for others to do the hard part, more profitable to wait for the refinements that make the app easier to use and more profitable to wait for the prices to drop. Let someone else act as the test mule.

 

[George Hatch]

Fannie/Freddie are talking tough about rejecting appraisals that don't include consideration of market conditions adjustments and sales concession adjustments. If they hold the line and start cutting appraisers off for not meeting the requirements of these assignments then perhaps as many as 10% of the slackers will get cut off for refusing to cooperate and the other 90% of slackers will repent and clean up their act. In lieu of getting cut off.

If Fannie/Freddie DON'T follow through and they DON'T enforce their requirements then most of the slackers will keep on slacking. Human nature. The Principle of Substitution doesn't just apply on the buyer's side; it also applies on the seller's side. So to speak.