Where on the grid to make this adjustment?

[J Grant]

I don't adjust options dollar for a dollar per the builder pricing- that is price, not value. We are asked for a value option.

Tah is why new home sales should be supplemented wit several recently built sales as well as a pending resale - does the 70 k in builder options get 70k back in the resale (open ) market, or does it get 50k back? or 90k back? New home premiums from a builder may or may not react the same way on a resale competing against lots of other properties . a resale within the subject community is the acid test of this.

 

[Zoe]

I don't adjust options dollar for a dollar per the builder pricing- that is price, not value. We are asked for a value option.

Tah is why new home sales should be supplemented wit several recently built sales as well as a pending resale - does the 70 k in builder options get 70k back in the resale (open ) market, or does it get 50k back? or 90k back? New home premiums from a builder may or may not react the same way on a resale competing against lots of other properties . a resale within the subject community is the acid test of this.

Here, the builder makes the buyer pay in cash for any upgrades to the original price. In other words if appraisal is lower, the builder already has their money for the changes and upgrades......

 

[The Bob]

I don't adjust options dollar for a dollar per the builder pricing- that is price, not value. We are asked for a value option.

Tah is why new home sales should be supplemented wit several recently built sales as well as a pending resale - does the 70 k in builder options get 70k back in the resale (open ) market, or does it get 50k back? or 90k back? New home premiums from a builder may or may not react the same way on a resale competing against lots of other properties . a resale within the subject community is the acid test of this.

We're not appraising the re-sale value of options/upgrades. They are what they are. I've always approached new construction as a niche market. I usually will adjust $4$ for options/upgrades knowing that any builder is going to charge for granite counters, upgraded cabinets, a coffered ceiling or a high end master bath etc...Can that buyer go to another builder who won't charge for those? Don't think so. So that's that market. It's not the same as a typical re-sale market. The motivation of the seller (builder) is to maximize profit. The motivation of the buyer is to get exactly what they want and they are willing and able to pay for that.

 

[J Grant]

We're not appraising the re-sale value of options/upgrades. They are what they are. I've always approached new construction as a niche market. I usually will adjust $4$ for options/upgrades knowing that any builder is going to charge for granite counters, upgraded cabinets, a coffered ceiling or a high end master bath etc...Can that buyer go to another builder who won't charge for those? Don't think so. So that's that market. It's not the same as a typical re-sale market. The motivation of the seller (builder) is to maximize profit. The motivation of the buyer is to get exactly what they want and they are willing and able to pay for that.

We are not appraising options and upgrades as stand-alone costs from the builder; we are appraising their contributory value to the whole.- and that is best seen in resale when the price as a whole ( the sale price ) is tested on the open market. A recent resale and listing pending with the subject community is best. Why are you afraid to use them?

We are providing a market VALUE opinion, not a price opinion ( though it is expressed as the most prophet price on the OPEN market ( which is not only teh narrow builder new home market )

The reason we use recently built resales is to see what the OPEN market pays for the options and upgrades vs. what the builder charges for them as a cost item.

There is a reason Fannie and Freddie ask for at least one outside sale or resale in the community, and if an appraiser cares about valuation, they use more than one additional resale. I use three new builder sales and two to three resales, and when the resales support the SC price, it is the stronger level of support.

 

[J Grant]

We're not appraising the re-sale value of options/upgrades. They are what they are. I've always approached new construction as a niche market. I usually will adjust $4$ for options/upgrades knowing that any builder is going to charge for granite counters, upgraded cabinets, a coffered ceiling or a high end master bath etc...Can that buyer go to another builder who won't charge for those? Don't think so. So that's that market. It's not the same as a typical re-sale market. The motivation of the seller (builder) is to maximize profit. The motivation of the buyer is to get exactly what they want and they are willing and able to pay for that.

TI is BECAUSE the motivation is different from a builder seller and a buyer paying line item costs that we included resales - resales better meet the definition of market value wrt the open market ( not the niche market as you admit) One day this might catch up with you, IMO , that you are basically giving a price opinion based on the same $ for $ a builder charges -on teh basis another builder would charge that - but we are not appraising just the builder to buyer market, we are appraising the house as if it sells on the open market because that is what the MV decision states.

 

[shrubberyvaluation]

TI is BECAUSE the motivation is different from a builder seller and a buyer paying line item costs that we included resales - resales better meet the definition of market value wrt the open market ( not the niche market as you admit) One day this might catch up with you, IMO , that you are basically giving a price opinion based on the same $ for $ a builder charges -on teh basis another builder would charge that - but we are not appraising just the builder to buyer market, we are appraising the house as if it sells on the open market because that is what the MV decision states.

I would also note that builders may have some incentives where they take off at the end for the final price so even in many cases the new home buyer isn't paying dollar for dollar. One cliche also is the gold toilet. Just cause the buyer will pay for it does not mean the. Market will. Custom homes are going to fall into this the most where cost is below market value.

 

[TerryRohrer]

One buyer clearly was willing to pay ~12k for that additional garage bay etc. The adjustment for it should be ~12k.

You are not alone in this belief, and you could not be more wrong. Using the same logic, I have had builders argue that BCIs, a costly upgrade over 2x12s, add value equal to their cost, yet when I inspect the home, there are no BCIs or 2x12s visible. Please explain how buyers decide to pay a premium for features they cannot be aware of.

If upgrade and individual preferences returned their cost, plus profit, dollar for dollar, why are builders leaving them out of their base models? Because the builders know they won't get their own money back.

Your statement suggests that cost equals value and that one sale (personal preference) makes a market. If that were remotely near reality, every property necessarily has to have a market value exactly equal to any contract it might be subject to.

 

[TerryRohrer]

We're not appraising the re-sale value of options/upgrades. They are what they are. I've always approached new construction as a niche market. I usually will adjust $4$ for options/upgrades knowing that any builder is going to charge for granite counters, upgraded cabinets, a coffered ceiling or a high end master bath etc...Can that buyer go to another builder who won't charge for those? Don't think so. So that's that market. It's not the same as a typical re-sale market. The motivation of the seller (builder) is to maximize profit. The motivation of the buyer is to get exactly what they want and they are willing and able to pay for that.

So if what one buyer wants equals value, how can any property not have a market value equal to its contract price, ever. This approach is simply appeasing all parties involved. No need for appraisers in this scenario.

 

[The Bob]

I'm talking about value related upgrades, like the examples I posted.

Let me ask you this. For existing housing do you adjust for differences in upgrading? Like your subject has a recently renovated kitchen and master bath, but one of your comps doesn't? Do you adjust for that? If so, why? Maybe because those existing houses that have been updated sell for more?

Why would it be any different for new construction where it is clear as day that buyers will pay more for houses with upgrades than those without upgrades? If that's what the buyer's and seller's are doing, why would I report something different?

 

[TerryRohrer]

I'm talking about value related upgrades, like the examples I posted.

Let me ask you this. For existing housing do you adjust for differences in upgrading? Like your subject has a recently renovated kitchen and master bath, but one of your comps doesn't? Do you adjust for that? If so, why? Maybe because those existing houses that have been updated sell for more?

Why would it be any different for new construction where it is clear as day that buyers will pay more for houses with upgrades than those without upgrades? If that's what the buyer's and seller's are doing, why would I report something different?

So your adjustment for updates is the cost of the update? You stated that the added value is the cost of the upgrade. If you can show that a $10,000 additional cost for granite countertops adds $10,000 in market value compared to other alternatives, your good. Can you?

In the same vein, if your data and analysis are so good, you are probably able to gauge value differences between brands of toilets, styles of cabinets, colors of paint, and the value of improvements made on Friday vs those made on Monday.

But, I have my doubts.