Project Delivery

This message has been cross posted to the following Discussion Forums: Project Delivery and Custom Residential Architects Network .
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Custom Residences are very difficult to build, especially in today's economic climate. It's hard enough to find people willing to spend more on a custom residence and even harder to find a bank willing to lend them money. I don't know if any of you have noticed how low appraisals are coming in these days, but I know for a fact sales have steadily gone up over the last few years in my area, yet this year appraisals are coming in suspiciously lower. Perhaps the appraisers are just being more conservative? OR maybe it's more is going on under the hood.

Appraisal Reform should be the top agenda for Architects, especially Residential Architects. The only houses that can boost property value in a neighborhood are the ones that just sold. Only a Speculative House can sell for the highest value per sf simply because they are the only houses that are sold as NEW. My favorite builder and I used to build many unique Speculative Houses and have almost a decade's worth of a track record of selling the most expensive houses in the area. If you know anything about how a bank determines how much they are willing to lend your clients, you know that the Value placed on your project is based on the average of the most recent sales of "Comparable" properties  in your area (AKA Comps). When you provide the highest Comps in your area, your next project is averaged against your competitors. It is impossible to get an appraisal to equal your own sales history if you're always providing the highest Comps. The guy building the cheapest, mass produced box is getting appraisals that far exceed their sales history when they get to leach off of your more successful sales. The system is designed to work against providing better quality projects while reward the ones that are least desirable, meaning the ones that sell for the least. This is the chief reason why the majority of houses built in this country are terrible, mass produced boxes. The bane of our existence. Not only does this deter better design, but it affects Sustainability, not because the people don't want it, but because it's near impossible to finance a house that costs more to build than what the Speculative Builders are already providing in your area. We can either convince the Speculative Builders to do a better job OR we can fight to change this moronic system of assigning value based on how well your competitors are doing.

Now it's hard enough to believe a lousy Spec House is valued the most per sf, but the Custom Residences we provide often are viewed as over priced because when they do sell, they're sold at USED prices because they are typically sold long after they are built and lived in by the owners that hire us. A Custom Residence designed by a professional Architect for an end user has no way of contributing to the value of the neighborhood. That is, until it eventually sells. The problem here is that OUR residences are often taxed at the highest mileage rate because they are unique for the area. At least this is what's happening to my clients. So my clients are contributing to the value of the neighborhood in the form of the highest property tax rate, yet the Real Estate Appraiser for the bank does not acknowledge these properties when it comes to determining the value of a loan for our next project. Is this not TAXATION WITHOUT REPRESENTATION? 

I have a client who built the first truly unique house for the area. It inspired many of my other clients to build nicer houses and other Architects are now designing innovative houses for the area. This is quite an accomplishment considering how closed minded the South East can be about modern design. When this client went to sell their house due to a job loss, they were infuriated by the low appraisals they were given after paying the highest mileage rate for property taxes. There was about a 20% difference in the Tax Assessor's Appraisal vs the Bank's Appraisal. Now that both spouses are working again and they were able to build a new house, they didn't want to pay taxes on another unique house, so they had me design a farm house this time.

I have another client who asked me to design a $1.3 million house and they have been given the run around by several large banks. They are paying for $700K out of pocket and decided to begin construction without securing the loan (wife is pregnant and doesn't want to wait) They are mostly completely framed now and yet another bank has backed out. The new houses of 1/2 the size are selling for about $700K. This means the bank would only have to sell the house for $600K if they default. Someone would get a very good deal paying $600K-$700K for a $1.3 million house, yet the banks can't stomach the project because it's different. They refuse to look at the track record of the builder and I as far as OUR sales are concerned. They are far more interested in the recent sales of our competitors who have a handful of lesser quality mass produced houses in the area, while we have built nearly 70 unique projects of various size, configuration, etc. Everyone of our projects has done very well at market, but they want to look at the mass produced houses that our competitor's just sold instead to determine the most likely price the house would sell for.

The system is designed to end our profession and turn people off to new and exciting design. The system must be changed and we must quit lying around and letting this non-sense happen. It's no accident that regular people live in awful houses. It's not that they have bad taste. It's because we're not paying attention to the financing aspect of the business. It's because system encourages a race to the bottom. 

I can't start a revolution by myself (and I've been trying), so for the sake of design and Architecture, let's do something about this! 

APPRAISAL REFORM SHOULD BE OUR TOP AGENDA ITEM!!!
   
-------------------------------------------
Eric Rawlings AIA
Owner
Rawlings Design, Inc.
Decatur GA
-------------------------------------------

You've defined the nature of the problem.  The nature of the solution is a lot less clear.  What does appraisal reform look like?  Reforming our financial institutions and structures has not been our (everyone not just architects) strong suit lately.  If you think you have a plan, and I suspect you do, it ought to be spelled out.  There's a long tough road ahead for people  undertaking this venture. 

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Eugene Ely AIA, LEED AP
Architect in Waiting
San Jose, CA
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Original Message:
Sent: 06-29-2012 19:40
From: Eric Rawlings
Subject: Appraisal Reform - #1 Agenda for Architects

This message has been cross posted to the following Discussion Forums: Project Delivery and Custom Residential Architects Network .
-------------------------------------------
Custom Residences are very difficult to build, especially in today's economic climate. It's hard enough to find people willing to spend more on a custom residence and even harder to find a bank willing to lend them money. I don't know if any of you have noticed how low appraisals are coming in these days, but I know for a fact sales have steadily gone up over the last few years in my area, yet this year appraisals are coming in suspiciously lower. Perhaps the appraisers are just being more conservative? OR maybe it's more is going on under the hood.

Appraisal Reform should be the top agenda for Architects, especially Residential Architects. The only houses that can boost property value in a neighborhood are the ones that just sold. Only a Speculative House can sell for the highest value per sf simply because they are the only houses that are sold as NEW. My favorite builder and I used to build many unique Speculative Houses and have almost a decade's worth of a track record of selling the most expensive houses in the area. If you know anything about how a bank determines how much they are willing to lend your clients, you know that the Value placed on your project is based on the average of the most recent sales of "Comparable" properties  in your area (AKA Comps). When you provide the highest Comps in your area, your next project is averaged against your competitors. It is impossible to get an appraisal to equal your own sales history if you're always providing the highest Comps. The guy building the cheapest, mass produced box is getting appraisals that far exceed their sales history when they get to leach off of your more successful sales. The system is designed to work against providing better quality projects while reward the ones that are least desirable, meaning the ones that sell for the least. This is the chief reason why the majority of houses built in this country are terrible, mass produced boxes. The bane of our existence. Not only does this deter better design, but it affects Sustainability, not because the people don't want it, but because it's near impossible to finance a house that costs more to build than what the Speculative Builders are already providing in your area. We can either convince the Speculative Builders to do a better job OR we can fight to change this moronic system of assigning value based on how well your competitors are doing.

Now it's hard enough to believe a lousy Spec House is valued the most per sf, but the Custom Residences we provide often are viewed as over priced because when they do sell, they're sold at USED prices because they are typically sold long after they are built and lived in by the owners that hire us. A Custom Residence designed by a professional Architect for an end user has no way of contributing to the value of the neighborhood. That is, until it eventually sells. The problem here is that OUR residences are often taxed at the highest mileage rate because they are unique for the area. At least this is what's happening to my clients. So my clients are contributing to the value of the neighborhood in the form of the highest property tax rate, yet the Real Estate Appraiser for the bank does not acknowledge these properties when it comes to determining the value of a loan for our next project. Is this not TAXATION WITHOUT REPRESENTATION? 

I have a client who built the first truly unique house for the area. It inspired many of my other clients to build nicer houses and other Architects are now designing innovative houses for the area. This is quite an accomplishment considering how closed minded the South East can be about modern design. When this client went to sell their house due to a job loss, they were infuriated by the low appraisals they were given after paying the highest mileage rate for property taxes. There was about a 20% difference in the Tax Assessor's Appraisal vs the Bank's Appraisal. Now that both spouses are working again and they were able to build a new house, they didn't want to pay taxes on another unique house, so they had me design a farm house this time.

I have another client who asked me to design a $1.3 million house and they have been given the run around by several large banks. They are paying for $700K out of pocket and decided to begin construction without securing the loan (wife is pregnant and doesn't want to wait) They are mostly completely framed now and yet another bank has backed out. The new houses of 1/2 the size are selling for about $700K. This means the bank would only have to sell the house for $600K if they default. Someone would get a very good deal paying $600K-$700K for a $1.3 million house, yet the banks can't stomach the project because it's different. They refuse to look at the track record of the builder and I as far as OUR sales are concerned. They are far more interested in the recent sales of our competitors who have a handful of lesser quality mass produced houses in the area, while we have built nearly 70 unique projects of various size, configuration, etc. Everyone of our projects has done very well at market, but they want to look at the mass produced houses that our competitor's just sold instead to determine the most likely price the house would sell for.

The system is designed to end our profession and turn people off to new and exciting design. The system must be changed and we must quit lying around and letting this non-sense happen. It's no accident that regular people live in awful houses. It's not that they have bad taste. It's because we're not paying attention to the financing aspect of the business. It's because system encourages a race to the bottom. 

I can't start a revolution by myself (and I've been trying), so for the sake of design and Architecture, let's do something about this! 

APPRAISAL REFORM SHOULD BE OUR TOP AGENDA ITEM!!!
   
-------------------------------------------
Eric Rawlings AIA
Owner
Rawlings Design, Inc.
Decatur GA
-------------------------------------------

I agree that Mr. Rawlings has done a good job of describing what my GA Tech architecture professor was trying to teach me twenty years ago when he said the "race to the bottom" destroys traditional neighborhoods and makes way for corporate sky scrapers and developments in their place.  By not differentiating between the "use value" of a property and the "investment value" of a property, great injustices are done to neighborhoods.  I appears that the government taxes the "use value" and the bank appraises the "investment value".
Frank

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Frank Marshall AIA
Architect
SMB&R Inc
Camp Hill PA
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Original Message:
Sent: 07-02-2012 11:38
From: Eugene Ely
Subject: Appraisal Reform - #1 Agenda for Architects

You've defined the nature of the problem.  The nature of the solution is a lot less clear.  What does appraisal reform look like?  Reforming our financial institutions and structures has not been our (everyone not just architects) strong suit lately.  If you think you have a plan, and I suspect you do, it ought to be spelled out.  There's a long tough road ahead for people  undertaking this venture. 

-------------------------------------------
Eugene Ely AIA, LEED AP
Architect in Waiting
San Jose, CA
-------------------------------------------






Original Message:
Sent: 06-29-2012 19:40
From: Eric Rawlings
Subject: Appraisal Reform - #1 Agenda for Architects

This message has been cross posted to the following Discussion Forums: Project Delivery and Custom Residential Architects Network .
-------------------------------------------
Custom Residences are very difficult to build, especially in today's economic climate. It's hard enough to find people willing to spend more on a custom residence and even harder to find a bank willing to lend them money. I don't know if any of you have noticed how low appraisals are coming in these days, but I know for a fact sales have steadily gone up over the last few years in my area, yet this year appraisals are coming in suspiciously lower. Perhaps the appraisers are just being more conservative? OR maybe it's more is going on under the hood.

Appraisal Reform should be the top agenda for Architects, especially Residential Architects. The only houses that can boost property value in a neighborhood are the ones that just sold. Only a Speculative House can sell for the highest value per sf simply because they are the only houses that are sold as NEW. My favorite builder and I used to build many unique Speculative Houses and have almost a decade's worth of a track record of selling the most expensive houses in the area. If you know anything about how a bank determines how much they are willing to lend your clients, you know that the Value placed on your project is based on the average of the most recent sales of "Comparable" properties  in your area (AKA Comps). When you provide the highest Comps in your area, your next project is averaged against your competitors. It is impossible to get an appraisal to equal your own sales history if you're always providing the highest Comps. The guy building the cheapest, mass produced box is getting appraisals that far exceed their sales history when they get to leach off of your more successful sales. The system is designed to work against providing better quality projects while reward the ones that are least desirable, meaning the ones that sell for the least. This is the chief reason why the majority of houses built in this country are terrible, mass produced boxes. The bane of our existence. Not only does this deter better design, but it affects Sustainability, not because the people don't want it, but because it's near impossible to finance a house that costs more to build than what the Speculative Builders are already providing in your area. We can either convince the Speculative Builders to do a better job OR we can fight to change this moronic system of assigning value based on how well your competitors are doing.

Now it's hard enough to believe a lousy Spec House is valued the most per sf, but the Custom Residences we provide often are viewed as over priced because when they do sell, they're sold at USED prices because they are typically sold long after they are built and lived in by the owners that hire us. A Custom Residence designed by a professional Architect for an end user has no way of contributing to the value of the neighborhood. That is, until it eventually sells. The problem here is that OUR residences are often taxed at the highest mileage rate because they are unique for the area. At least this is what's happening to my clients. So my clients are contributing to the value of the neighborhood in the form of the highest property tax rate, yet the Real Estate Appraiser for the bank does not acknowledge these properties when it comes to determining the value of a loan for our next project. Is this not TAXATION WITHOUT REPRESENTATION? 

I have a client who built the first truly unique house for the area. It inspired many of my other clients to build nicer houses and other Architects are now designing innovative houses for the area. This is quite an accomplishment considering how closed minded the South East can be about modern design. When this client went to sell their house due to a job loss, they were infuriated by the low appraisals they were given after paying the highest mileage rate for property taxes. There was about a 20% difference in the Tax Assessor's Appraisal vs the Bank's Appraisal. Now that both spouses are working again and they were able to build a new house, they didn't want to pay taxes on another unique house, so they had me design a farm house this time.

I have another client who asked me to design a $1.3 million house and they have been given the run around by several large banks. They are paying for $700K out of pocket and decided to begin construction without securing the loan (wife is pregnant and doesn't want to wait) They are mostly completely framed now and yet another bank has backed out. The new houses of 1/2 the size are selling for about $700K. This means the bank would only have to sell the house for $600K if they default. Someone would get a very good deal paying $600K-$700K for a $1.3 million house, yet the banks can't stomach the project because it's different. They refuse to look at the track record of the builder and I as far as OUR sales are concerned. They are far more interested in the recent sales of our competitors who have a handful of lesser quality mass produced houses in the area, while we have built nearly 70 unique projects of various size, configuration, etc. Everyone of our projects has done very well at market, but they want to look at the mass produced houses that our competitor's just sold instead to determine the most likely price the house would sell for.

The system is designed to end our profession and turn people off to new and exciting design. The system must be changed and we must quit lying around and letting this non-sense happen. It's no accident that regular people live in awful houses. It's not that they have bad taste. It's because we're not paying attention to the financing aspect of the business. It's because system encourages a race to the bottom. 

I can't start a revolution by myself (and I've been trying), so for the sake of design and Architecture, let's do something about this! 

APPRAISAL REFORM SHOULD BE OUR TOP AGENDA ITEM!!!
   
-------------------------------------------
Eric Rawlings AIA
Owner
Rawlings Design, Inc.
Decatur GA
-------------------------------------------

Interestingly, the House Insurance, Housing and Community Opportunity Subcommittee held a hearing on appraisal oversight on June 28. Among the items considered was a statement for the record submitted by NAHB. http://www.forresidentialpros.com/news/10738305/nahb-submits-statement-to-house-subcommittee-about-appraisal-reform?cmpid=email_RCL120703003&utm_source=QUR+Remodelers+Briefing&utm_medium=email&utm_campaign=RCL120703003

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Sean Catherall, AIA
Herriman UT
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I sent a letter to the GA and Atlanta presidents of the NAHB. I got an email response, but could never get a meeting scheduled. I wish I had all the time in the world to focus on this issue, but I have to eat and pay bills. I survived this recession working for regular people on middle class budgeted housing. I know Sean has been doing some of the same. It may not be the next cover story of Architecture Magazine, but the quality of what I've been able to bring to people that have settled for cookie cutter boxes is becoming more and more undeniable. I'm clearly not the most talented here, but I connected the dots to break into a relatively untapped market that is proving to not be a bad way to make a living. 

Over the weekend, a builder I work with quite often told me that a mass production builder in the area was complaining to an Appraiser about his boxes not being valued as high as her (and my) unique houses. The Appraiser said the builder's plans were from 2002 and my builder uses new unique (up to date) plans designed by an Architect. She and I also have almost a decade of a track record selling the most expensive houses in the area. We have almost 70 built projects in the area ranging from small $50K additions to $1.3 million new houses. Some were built at spec and some were for home owners. It's the spec houses that gave the Appraisers the consistent sales data to understand that design makes a difference in what people find desirable. Don't be afraid of designing at spec, these houses represent over 80% of all new housing and this is the easiest way to get our values across to regular people.

If we get out there and show the housing market what we're worth, then we'll turn heads. Talk is cheap and we can't design only the cover stories if we want regular people to get us. The people in my area are beginning to have a different attitude about quality because they can see the proof on the ground. They see that design can make a difference when I'm using the same materials and processes as everyone else. I'm just arranging the materials differently, sculpting the spaces differently, and engaging each site as if the building grew up from that specific piece of ground rather than being shoved off the back of a truck as unit 12 of 122. Builders make great clients! They bring you work, especially when they see the value of a better design. It's a bit painful getting started with the first one, but I recommend listening to them as much as you want to educate them. You have a lot more to learn from them than you might think...

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Eric Rawlings AIA
Owner
Rawlings Design, Inc.
Decatur GA
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Original Message:
Sent: 07-06-2012 11:00
From: Sean Catherall
Subject: Appraisal Reform - #1 Agenda for Architects

Interestingly, the House Insurance, Housing and Community Opportunity Subcommittee held a hearing on appraisal oversight on June 28. Among the items considered was a statement for the record submitted by NAHB. http://www.forresidentialpros.com/news/10738305/nahb-submits-statement-to-house-subcommittee-about-appraisal-reform?cmpid=email_RCL120703003&utm_source=QUR+Remodelers+Briefing&utm_medium=email&utm_campaign=RCL120703003

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Sean Catherall, AIA
Herriman UT
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