Thread: Realestate questions, am I the only one?

I doubt it, but I am having a hard time understanding how this is possible. Anyone with more insight/wisdom please feel free to offer:

So, my wife and I just finished our house and had the appraisal done. It came in $60k LESS than what the hard costs were to build it. This is the actually material costs, no Overhead/Profit, carrying costs or Markup.

I was the architect, GC and did all the finish work (Wd flooring, tile, trim, kitchen, etc.) as well as installing the security system, whole house stereo and milled all the hardwood floors.

We put down 20% of the total construction costs of our own money and then used the bank for the rest and still only ended up with less than a 95% LTV.

It's not like I bought a used car that lost 20% of its value the moment I drove it off the lot but how can I buy a stud for $2 then it only be worth $1.50?

I know, I know...market demand, surplus housing, etc. But I just can't come to grips that a house is worth less than the hard cost of its parts. I'm going to end up paying PMI on a house that I put 20% cash into and then killed myself to build sweat equity. It just seems crazy to me.

Rant off. Thanks for letting me vent

Hey I feel your pain. It's all a matter of supply and demand, as you know. There are plenty of new housing developments out there sitting empty because the demand dried up (which everyone over the age of 30 saw coming).

You've built a house that the market won't bear. It's nicer than people are willing to pay for. You should feell good that you have the home you want, and take solace in the fact that you won't have to move anytime soon. Some day the market will be back strong, and you'll be ready to sell by then.

Relax and wait a bit,,,,you'll see it on the back end soon enough....The worm always turns.

I have to admit that I didn't fully understand this post but if you will answer two questions, I'm sure all will become clear:

1) What was the purpose of the appraisal?

2) Who is paying the appraiser?

The man who pays the piper calls the tune.

Supply and demand clearly affect value, but there is a larger issue in play here. As a result of the meltdown of the Capital market lenders are doing anything to protect their reserves and to make certain that they are excessively protected from an LTV standpoint. Appraisers are retained by lenders and their appraisals are subject to review by the lender. Hence the extreme markdown in market value which benefits (guess who) the lender.

Cost of construction or replacement cost is always a pretty tough metric. When you have lender underwriting that borders on the insane the end result is the beating you took.

My business is investment real estate and brokerage. The illogic of your story is not, unfortunately, unique. Things will turn eventually and you will be able to re-finance back to a more reasonable position.

Meanwhile....have fun with you straights.

Originally Posted by joesixpack

because the demand dried up (which everyone over the age of 30 saw coming).

some of us under 30 saw it coming too

6Myles

welcome to the world of hotrods
spend $20K and hundreds of hours to make a $7k car

take solace in the fact that although there are a lot of poorly built houses out there right now, but your's isn't one of them

oh yeah

Originally Posted by Chimensch

I have to admit that I didn't fully understand this post but if you will answer two questions, I'm sure all will become clear:

1) What was the purpose of the appraisal?

2) Who is paying the appraiser?

The man who pays the piper calls the tune.

I can't speak about North Carolina, but where I live the appraiser is valuing your house for tax purposes. where I live, the appraiser is an employee of the county, because it is the county you are paying property taxes to.

having your house undervalued is good if you are living there because it makes property tax cheaper. so for the time being, he's come out ahead.

if he ever decides to sell it, he'll just have it re-appraised, and bribe the appraiser to raise the value. (this is easy... getting them to LOWER the value is hard, because they make less tax money that way.)

1) Did you buy at trade prices?

2) Everything to do with the property market seems to be a con. For example it makes my blood boil when developers buy a nice house for £100,000, convert it into two crappy flats, and sell each flat for over £100,000.

(Those prices are outdated, but factual, so I won't scale them up to today's prices.)

If it's a tax appraisal this is pretty normal.. my tax appraisal is something like 40% of market value on my house...

This is for my refinance appraisal (market value), not taxes.