Where on the grid to make this adjustment?

[J Grant]

DEFINITION OF MARKET VALUE: The most probable price which a property should bring in a competitive and open
market under all conditions requisite to a fair sale,...

The open market is not the same as "Only the new home market " - and the problem with the new home market is builder charges line items cost for upgrades and lot premiums - whereas in an open market sale, where the subject competes against both new and resale existing homes, the contributory value of a lot or upgrade to the whole is in the price.

Lot premiums from builder can be especially absurd -or not, but only way to tell is analyze what those "premium" lot charges get, or don;t get, on the open market. for never to be

 

[Mike Ault]

I don't see it so much as trying to predict a future event as using a current event (resale of similar home) to illustrate the functional obsolescence of generally overpriced and high-margin 'upgrades'.

Is there still a suggestion/prohibition against using 'constructed' comps? For example, Lot = $100K, contract house price = $400K, "comp" is $500K that was never exposed to the market. Maybe they've done away with that guideline for convenience sake (easier to hit the number desired) but I'm pretty certain that there was guidance against that back when I did F/F work.

That prohibition is still in effect. Because it makes sense. Were also supposed to be using sales from competing builders as well, to ensure that those "upgrades & premiums" the builder is charging make sense in the overall scheme of things.

 

[J Grant]

That prohibition is still in effect. Because it makes sense. Were also supposed to be using sales from competing builders as well, to ensure that those "upgrades & premiums" the builder is charging make sense in the overall scheme of things.

More important imo than sales from other builders is the use sales and spending /listings of recently built homes offered on MLS/open market -the best being in the subject subdivision if they exist.

 

[The Bob]

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.

If your data showed that a garage added $8-$14K, and your gridded comps show the added value is $12k, then yea, that's your adjustment for that comp.

I run group sales data on almost every feature. Typically that data will show a range from $0 to $XX. So when I grid my comps, knowing that range, I will defer to what the comps I'm using say for that adjustment.

 

[Mike Ault]

More important imo than sales from other builders is the use sales and spending /listings of recently built homes offered on MLS/open market -the best being in the subject subdivision if they exist.

Yes, resales of those homes exposes a lot of sins.

 

[The Bob]

New construction that is built and then sold, or does not have any customization, seems more reflective of the market than a custom home where people are paying for each feature that specific person(s) want. Custom homes, especially with less common features, more often sell for more than market value.

Bull****. That's probably one of the dumbest statements I've ever seen on AF. If virtually every buyer in the new home market is paying more for upgraded kitchens and other features, that's the market. Same as when you have down trending market and people are paying less for the same house they were buying 6-9 months ago.

 

[The Bob]

We don't just "report" the market activity; we ANALYE it.
Typically, buyers pay more for the upgraded houses, whether new or existing/resale. However, the NEW home upgrades from the builder are charged as a line item cost, cash register style, like bringing up items in a store. That is why, a new home contract can be 40-60 pages long - the builder will itemize and line charge for every little thing - an upgraded hardware pull, upgraded carpet insulation, bone color tile choice vs cream color tile, this C level of wiring vs D level - a base model house priced at 360k can close at 500k with all those items added up.

Will the next buyer pay 140 for all that stuff, some of it personal taste choices, other of it not even noticeable, like who cares about level A carpet insulation the builder changed $60000 more for?
Market value opinion is the most probable price on the OPEN market, ( not just the more narrow builder niche new home market. ) so in order to find out what the buyer reaction would be, the appraiser must find recently built similar , perhaps in same subdivon, resales of existing homes listed on MLS.

I love reading the listing comments - the buyer spent 200k on upgrades from the builder - and on resale; a year later, we see with extraction, the resale got back 100k . If it gets back 200k, great, we just provided support. But rote adjusting for cost of builder upgrades can one day catch up with those appraisals -

You have to be one of the most obtuse people I've ever run across. VALUE related features. I'm not talking about phucking cabinet pulls. And yes our reports reflect the market participants actions.

 

[Mike Ault]

Bull****. That's probably one of the dumbest statements I've ever seen on AF. If virtually every buyer in the new home market is paying more for upgraded kitchens and other features, that's the market. Same as when you have down trending market and people are paying less for the same house they were buying 6-9 months ago.

I believe the poster was referring to less common custom features such as "tennis courts", and "helipad's". Those typically exhibit functional obsolescence from the moment they are built because they do not recoup the cost to construct them when exposed to the open market.

 

[J Grant]

You have to be one of the most obtuse people I've ever run across. VALUE related features. I'm not talking about phucking cabinet pulls. And yes our reports reflect the market participants actions.

I'm not being obtuse - I was giving an example that more goes into the $ upgrade total on a new house than just VALUE-related features - and even with VALUE-related features, the line item cost charges from a builder to a particular model house buyer can be different than the $ amount that same VALUE related feature gets for contributory value on the resale ( open market )

While new home buyers are market participants, the MV definition references the open market, not just the new home-specific market where a builder controls costs and line item charges -

 

[shrubberyvaluation]

Bull****. That's probably one of the dumbest statements I've ever seen on AF. If virtually every buyer in the new home market is paying more for upgraded kitchens and other features, that's the market. Same as when you have down trending market and people are paying less for the same house they were buying 6-9 months ago.

I said one buyer, for one custom home. I think you misread. One buyer does not make a market. Just because that person wants a full size indoor basketball court doesn't mean everyone is willing to pay for it what that person did. The less common the features, the less chance it will sell for market value. Its not a hard concept.