New Construction - Home Value

[mitchjav]

Hi...for those that might have some expertise in this area...

Buying a new home in 55+ community. The cost of the home includes:

• the base price
• a "lot premium"
• the cost of structural upgrades (e.g. bumping out rooms)
• the cost of design upgrades (finishes) including things like appliances
• the cost of items that are being rolled into the purchase price by the builder but are really for 3rd parties - the cost of the window shades and the cost of the security system (both of which are handled by contractors who the builder works with)

Question is from the standpoint of home value, do all of these costs become
part of the appraised value of the house or are some of the upgrades, appliances, 3rd party costs excluded. This is a newly build community so there are no (or very few) comps - concern is are we adding too many upgrades such that we're going to raise the value too high relative to other homes in the community and thus it becoming an issue when/if we decide to sell. So which costs, if any, would I deduct from the appraised and/or market value of the home?

 

[VanWinkle]

Hi...for those that might have some expertise in this area...

Buying a new home in 55+ community. The cost of the home includes:

• the base price
• a "lot premium"
• the cost of structural upgrades (e.g. bumping out rooms)
• the cost of design upgrades (finishes) including things like appliances
• the cost of items that are being rolled into the purchase price by the builder but are really for 3rd parties - the cost of the window shades and the cost of the security system (both of which are handled by contractors who the builder works with)

Question is from the standpoint of home value, do all of these costs become
part of the appraised value of the house or are some of the upgrades, appliances, 3rd party costs excluded. This is a newly build community so there are no (or very few) comps - concern is are we adding too many upgrades such that we're going to raise the value too high relative to other homes in the community and thus it becoming an issue when/if we decide to sell. So which costs, if any, would I deduct from the appraised and/or market value of the home?

Recognize that you are building during one of the most expensive times to build a residence due to costs of materials, reduced existing homes on the market, and a general resurgence in the housing market. If you think you will sell in less than 5-7 years, you should not be building a new home but likely renting or leasing instead. As far as upgrades adding to value, the formula during the time of the build is for an increase in market value for upgrades at 20-30% of costs adding to value. 1000.00 cost may add 300.00 value. Only you can decide if the upgrades are worth it as you will be the one enjoying them.

I am also going to a 55+ community in 2 weeks to consider building a new home.

 

[Music Lover]

Get the upgrades you want (within reason) and enjoy the house. Go too far for the neighborhood and you'll never get it back.

For what it's worth...a $1000 fridge works exactly the same as a $5000 fridge.

 

[Bamaman]

I've noticed that the prices on planned retirement communities are substantially higher than a comparable home in a non-retirement community--probably $100K more.

But you're often paying for the recreational amenities like tennis/golf/pools, etc.

Many of these communities have a natural turnover of residents, and hopefully you can recover the home's cost later as long as the community is well run and popular.

 

[OldShooter]

... Question is from the standpoint of home value, do all of these costs become part of the appraised value of the house or are some of the upgrades, appliances, 3rd party costs excluded. This is a newly build community so there are no (or very few) comps - concern is are we adding too many upgrades such that we're going to raise the value too high relative to other homes in the community and thus it becoming an issue when/if we decide to sell. So which costs, if any, would I deduct from the appraised and/or market value of the home?

In our state, the tax value is called "Estimated Market Value" and is at least theoretically based on comparable sales. Typically, there is a value assigned to the land and a value assigned to the home. Land values are adjusted based on things like lot size, proximity to negative factors like high traffic roads, commercial activity, etc. Home values are based on the comps with adjustment for the age and condition of the specific structure. All this is done by the county assessors. They inspect the interior of the home every few years to check for significant improvements that might increase its value. Supposedly the state does a QC check by comparing actual sales to EMV of the same property and calculates an error %.

I have no experience with new developments/new construction but in our state I'd expect the comps to dominate to the extent there are comps, even reaching for comps in similar developments many miles away.

If you considered the near-in resale value of a new structure you would never build IMO. True confessions: We are about to build a new lake home and my guess is that we'll "lose" up to 1/3 of the cost if we look at near-in resale value. And why not? Anyone willing to pay our total cost could instead use that amount to build a house that is exactly what they want instead of taking what we wanted. So I don't expect our county EMV to be what the structure cost us. I will be very disappointed if it is.

 

[ivinsfan]

I'll just speak to the lot upgrade charge IMO that's pie in the sky and pretty much evaporates for resale purposes..at the most you might recoup pennies on the dollar.


When we toured new developments in Southern Utah, I was floored by these lot upcharges which seemed way out of line for the actual lot location.

 

[mitchjav]

If you considered the near-in resale value of a new structure you would never build IMO. True confessions: We are about to build a new lake home and my guess is that we'll "lose" up to 1/3 of the cost if we look at near-in resale value. And why not? Anyone willing to pay our total cost could instead use that amount to build a house that is exactly what they want instead of taking what we wanted. So I don't expect our country EMV to be what the structure cost us. I will be very disappointed if it is.

This is a great point - never thought of it that way...

 

[ExFlyBoy5]

In our state, the tax value is called "Estimated Market Value" and is at least theoretically based on comparable sales. Typically, there is a value assigned to the land and a value assigned to the home. Land values are adjusted based on things like lot size, proximity to negative factors like high traffic roads, commercial activity, etc. Home values are based on the comps with adjustment for the age and condition of the specific structure. All this is done by the county assessors. They inspect the interior of the home every few years to check for significant improvements that might increase its value. Supposedly the state does a QC check by comparing actual sales to EMV of the same property and calculates an error %.

I have no experience with new developments/new construction but in our state I'd expect the comps to dominate to the extent there are comps, even reaching for comps in similar developments many miles away.

If you considered the near-in resale value of a new structure you would never build IMO. True confessions: We are about to build a new lake home and my guess is that we'll "lose" up to 1/3 of the cost if we look at near-in resale value. And why not? Anyone willing to pay our total cost could instead use that amount to build a house that is exactly what they want instead of taking what we wanted. So I don't expect our country EMV to be what the structure cost us. I will be very disappointed if it is.

They actually GO IN the houses? I have never heard of that before and I would be hard pressed to let the government in my home without a warrant.

 

[marko]

They actually GO IN the houses? I have never heard of that before and I would be hard pressed to let the government in my home without a warrant.

In our town, you don't have to let them in but if you don't you cannot go back and ask for a re-assessment; you're stuck with whatever value they assign, no recourse.

Back to the OP, with few exceptions I would never let re-sale value be part of my decision; I get the house/property I want to live in and enjoy and deal with the re-sale later.

 

[Jerry1]

Get the upgrades you want (within reason) and enjoy the house. Go too far for the neighborhood and you'll never get it back.

Back to the OP, with few exceptions I would never let re-sale value be part of my decision; I get the house/property I want to live in and enjoy and deal with the re-sale later.

I look at it this way. I want my house to be what I want. The thought that you can live in a house for say 10 years and recoup your money is a dream. Of course, some people live the dream, but I've yet to have it. In round numbers, I have about $400K in my house. I bought it for $200K and rebuilt it for another $100K and put in a pool for $100. If I'm lucky, I could get $300K out of my house. But if I live in it and enjoy it for just 10 years and sell it for $300K, then I lived in my house for $833 per month. With taxes and whatever, probably closer to $1,500 per month. You can't rent anything comparable to what I have for anywhere near that. So, is that I good deal? I think so. We each have to decide for ourselves, but if you have the money, at this stage in your life, why would you live in a house that you don't like. Can you imaging living in your new house and for the next 10 to 20 years saying that you wish you had a bigger lot, that you wish that wall wasn't there, if only I had a couple extra sq. ft. in the master bedroom . . .

If you have the money spend it on what will make you happy and don't worry so much about resale. The value to you is still there.

 

[OldShooter]

They actually GO IN the houses? I have never heard of that before and I would be hard pressed to let the government in my home without a warrant.

Their hammer is that they will have to estimate the house value without seeing the inside. Guess how that number will turn out?

Constitution probably precludes them having legal authority to enter, probable cause, etc. But as a practical matter, it is in our best interest to let them in.

 

[Music Lover]

They actually GO IN the houses? I have never heard of that before and I would be hard pressed to let the government in my home without a warrant.

One of friends was a city assessor for 35 years. No, you don't have to let them in but they'll assess the house making plenty of assumptions. You can appeal if you're unhappy but unless they can look inside nothing will change.