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OK, I'm working on a CMA for a customer wanting a new construction home. IMO, all the 2007 closings for new construction were contracted in ~2005 which was a high price point in the market.
How would you go about pricing new construction in a declining market?
I think your biggest issue is figuring out how many "incentives" builders gave on all these sales. Just because the home sold for 300K doesn't mean they didn't get 30K in upgrades free, 3% intrest rate, 6% closing costs, etc.
Location: Mokelumne Hill, CA & El Pescadero, BCS MX.
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I'm not sure what you're asking about. Is this a home to be built? Do you have a set of plans? If so, take them to a builder or two and have them bid on them. The add the land value and you're there.
Is your client wanting you to do a CMA on a home that already exists? If so, it's in competition with everything else in the market new or not.
Hey, thanks for jumping in and trying to help. I'm going to have a big bruise from all the head banging. Sorry I left out pertinent details.
The customer selected their target neighborhood. The community started 5 years ago and when completed will have ~750 homes. Resort-style community, all the homes are semi-custom, and price points from $250K to multi-millions. There are several new-and pre-owned homes on the market. Customer wants a new home, never been occupied. We saw all the inventory and they didn't like any of those.
And yes, in this community the builders have and are taking two years to complete. So, to get back to my point, the comparable sales contracted in 2005 are now closing in 2007. There are no other sales from 07. Since 05 was at the top of the market (price-wise), how am I supposed to speculate future value in a declining market?
I'm suffering from analysis paralysis! Maybe that's the problem. I want to be fair I just don't want them to pay over inflated prices.
Last edited by TampaKaren; 12-10-2007 at 12:25 PM..
I think all you can do is a cost adjustment based on current market. Look at what the market is doing as a whole and see if that gives you a adjusted number. No one has a crystal ball and I tell my clients that. Things are still theyre decision. Good luck!!
Location: Mokelumne Hill, CA & El Pescadero, BCS MX.
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Your problem is much easier then. Obtain a set of plans. Get all the builders you can to bid on the construction of the home. in an area where values range all over the board due to the custom nature of the individual building, it's the only way you can know.
Comps, and therefore a CMA, are inappropriate except for the value of the land on which the home is built.
In my area every home is in fact unique. No subdivisions. Every home is custom (except mfg ones) every piece of ground different. We don't usually end up doing CMA's for that reason and appraisers have the devils own time trying to do their job.
Thanks for the help and great advice! I appreciate it.
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