Eric, I am in agreement with your suggestion that appraisals of all types, including BPOs (Broker Price Opinions) and CMAs (Comparable Market Analyses) should have some identification of "Licensed Architect Designed" or not. This could simply be accomplished by having a checkbox on the appraisal/BPO/CMA form that indicates something as simple as: "WAS THIS HOME DESIGNED BY AN ARCHITECT? IF SO, ADD 20% TO THE TOTAL VALUATION." If indeed, that is the added value someone like Michael discovers is the appropriate amount to add to a home for having been designed by an architect. 20% is my off the cuff guesstimate, as an architect doing this for about 37 years. Under certain circumstances, it could be more; it could be less. For instance, what would be the valuation of Falling Water today? Architectural icons would be the exception to the rule.
GOAL: CREATE A SINGLE LINE ITEM FORMULA: It appears that what Michael is trying to do is to come up with a "one size fits all" equation and I respect and appreciate that. People will say that approach is too simplistic. Well, I have seen line items on some appraiser's forms that say simplistic things like: "Add $50,000 for a stone front porch and stone steps."
If appraisals can be that simplistic, then let's go ahead and become part of the calculation with at least some added valuation factor. That would be better the present situation for having a home designed by an architect, which is: zero. Something, even an overly simplistic increased factor is better than nothing.
SOME ARCHITECTS AND OTHERS WILL CREATE STATIC: Michael, you are going to encounter some resistance to your efforts. Do not that that deter you. All the residential architects in the AIA (and those also not in the AIA) appreciate what you are doing and thank you. Even if they give you negative comments about being "simplistic", they will directly benefit from your Research and Development and they should be thanking you and helping you. It is through scientific data gathering like yours that will result, hopefully, in making a nationwide improvement in how the public perceives the value of real architects and come to understand that our fee for designing their home will come back to them at resale time due to appraisal reforms brought about by people like you and Eric and others. Please continue. Fight the good fight. And oh, of course there are other things that bring our fee back to them, such as: reduced monthly power bills, due to an architect's efforts to improve the building envelope's sealing and higher insulation levels, proper overhangs to control sun, proper choice of windows, doors, siding and other factors. Then there are the aesthetic values that are intangible, but priceless, like properly orienting a home to a wonderful view, shielding private spaces from the street and opening those same private areas to the views, sensible organization, efficient space planning and capturing a client's lifestyle in the design, which an off-the-rack builder home simply cannot accomplish.
Some people will say: "but all architects are not the same. Some don't create homes that have as saleable features as others, yadda, yadda." Yeah, well, the same can be said of builders and others in the entire home creation, valuation and building cycle. And the appraisers muddle through it all, don't they? Making a mess of it generally, but they do forge ahead. All we are trying to do is make just one adjustment in the method: that in general, having a competent, capable licensed architect design your home should result in a better sales price. Is this a guarantee? No. Of course not. Neither is being in a good neighborhood. We have all seen exceptions to the rule. What is being sought here is an improvement in the appraisal methods through the addition of JUST ONE LINE ITEM that adjusts a home's value upward due to the fact that a home was designed by a real architect.
GOAL OF MICHAEL'S STUDY: GETTING ONE LINE ITEM ADDED TO APPRAISALS AND BPOs AND CMAs: And I think that should be your goal, Michael: you are trying to get just one line item added to an appraisal form. And that will be enough to help us all. Please do your study. I suggest you begin by creating an Excel spreadsheet, copying verbatim a nationally accepted appraisal form. Then, somewhere, down around the bottom of this, look where you can insert the new "Architect Designed Value Added" line item that pumps up the whole value by a factor that your study supports. This new spreadsheet of yours + your data will hopefully result in a game-change for home appraisals.
BPO/CMA/ REAL ESTATE BROKERS/INTERMEDIARY BPO SOLICITATION COMPANIES: Note that you are not done, with just appraisals! THERE ARE PROBABLY 4X MORE BPOs AND CMAs CONDUCTED BY REAL ESTATE BROKERS THAN THERE ARE OFFICIAL APPRAISALS. Banks and other lenders that are foreclosing on homes are the ones who solicit for and pay real estate brokers to create BPOs and CMAs. Why? Because a real estate broker will do it for much less than appraiser. Also, it is the real estate broker who has direct access to the MLS (Multiple Listing Service), which is where the data comes from to support Listing Prices and Sales Prices. And due to the volume of foreclosures over the last several years (millions), banks had to find some alternate method of valuing their sudden glut of repossessed homes and other properties. Therefore, they sought the assistance of real estate brokers. Therefore, once you, Michael, hopefully with the AIA's help (and the assistance of other organizations as well, we hope) tackle the appraisal industry and get the Architect Value Added line item, there will need to be some sort of trickle-down effort to get this line item added to bank/financial institution BPO and CMA forms. And here's the kicker: each form can be different for each institution. Also, there are various intermediaries that act as work-brokers for the banks, like Clear Capital, who in turn go out and solicit real estate brokers to conduct the actual BPO study. Then these intermediaries check the BPO, make sure it is as correct as possible, then they turn those BPOs over to the banks whom they represent. Of course, they get a fee for brokering these BPO studies. So, all these intermediary BPO solicitation companies will need to adjust their forms to add the Architect Value-Added line item as well. And that could very well take the entire might of the AIA to convince them to do that. This is a big job and it will not be done overnight.
AIA TASK FORCE NEEDED The AIA, with possibly you, Eric and Michael, heading a task force will need to tackle this. It is too much for just a single individual. Eric has been correctly ranting about this for at least a year and Mark Demerley assures me that he has been heard and that supposedly something is starting to happen within the AIA to begin correcting the appraisal process. I hope so.
And Eric, I would be happy to hear your talk, but my AIA dues took all my discretionary funds for events like this. But thanks for the invitation.
Everyone: have a nice weekend.
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Rand Soellner AIA
Architect/Owner/Principal
Rand Soellner Architect
Cashiers NC
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Original Message:
Sent: 08-16-2012 08:52
From: Eric Rawlings
Subject: Scientific Proof that Residential Architects Are Worth It?
Rand is making a good point about beginning the tracking process, but as pointed out, these values mean nothing unless compared to all of the sales that happened around the same time period within the same neighborhood. Otherwise what are we comparing? We can't just cherry pick our favorites and call this a legitimate analysis. The Real Estate web sites like MLS listings can provide all of this information, but you typically have to pay for access or be a licensed agent. Unfortunately, they don't have a check box for Licensed Architect designed.
I've done these comparisons to my own work and even my top sellers of that year in the same area are not always pricing out as well per sf as the builder boxes that hit that exact sweet spot of being able to qualify as a comp to my houses, but they build the least amount of floor area to do it. Example: In 2009 I had a 5 bed, 4.5 bath house with 3,792 sf sell for $785K or $207/sf. The low sale within a year of that sale was for a "comparable" mass produced box with 5 bed, 4 bath and 2,578 sf for $615K or $239/sf. These builders know how to game the system and take advantage of how appraisals work. BOth of these were spec houses within a 1/2 mile of each other. My house sold Jan 2009, when we had no idea if the banking system would exist for another week and the other house was able to use my sale as a comp at the beginning of 2010, when things were a little bit better. My house was used as the top comp by everyone like this for two years after the sale due to lack of sales available for comps. Mine was also the largest built at the time which is never favorable on the appraisals, so the bank limits the loan they are willing to give based on how it appraises. If you're on top, you only have one direction to go on an appraisal and that's down. If you hover at the bottom, then you have only one way to go and that's up.
With all that said, what I'm trying to get at is we may find ourselves very disappointed when comparing our higher sales as a $$$/sf value when we start analyzing how the El Cheapo houses price out. We can't say we're better without including what all the other houses are selling for in that area at that time. My suggestion is that the AIA may be able to ask MLS (and related sites) to include a check box for Licensed Architect Designed for each house that sells. This could be a good way for the State Boards to crack down on those claiming Architect titles when using that as a sales hook. In the Atlanta area they started doing this for green certification several years ago.
Part of my Appraisal Reform solution would require a central data base like MLS to record the Builder and Designers involved in all new sales so we can comp the work of the creators against their own work and pay a separate market price/ sf for the land to isolate the mystery of location and fluctuating market value of land. This way we can see exactly what people are paying for the house by itself and stop allowing the lousiest builders who sell their homes for the lowest price to be able to use our work as a comp to raise their own appraisal value and also forcing us to use comps for houses that have a history of not selling as well to degrade the values of our products. After all, the bank wants to know what that specific investment will sell for at market and not what any old house that happens to have 5 beds, 4 baths and is close the the same floor area will sell for. They should be interested if their investment was designed and built by a company with low or high sales histories. These two endeavors seem very related to me. What do you say Rand...Michael?
If you can make to Reinvention in Chicago this year, I'll be speaking on the subject of Appraisal Reform on Friday, Oct19th.
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Eric Rawlings AIA
Owner
Rawlings Design, Inc.
Decatur GA
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Original Message:
Sent: 08-15-2012 07:53
From: Rand Soellner
Subject: Scientific Proof that Residential Architects Are Worth It?
Good Morning Michael,
I have seen several responses to your request for data, none particularly helpful to you.
Hey CRAN folks, here is a soldier (Michael) trying to help us by assimilating data to help us prove that what we design is worth more! Let's give him some data, okay?
I think that any residential architect should be able to quote you how much per square foot their homes sold for. That, in my mind, is the great equalizer, and common denominator. For instance, in an up market, one of the homes I designed went for $833/HSF (Heated Square Feet). It was very custom, inside and out and had a view of a large, rare, high-mountain lake in a community of high-end homes. Lots of stone, heavy timber, large windows, custom finishes. I had another go for $416/HSF, also in a very nice community, but the view was not as commanding. Those were back in the Boom. After the bust, I had one of my mid-range homes go for $260.31 in a distressed situation, which means this is an under-valued position that will likely correct itself in future resales of that home. For instance, that home appraised for $704.46/HSF back in the Boom.
You will need to carefully review the parameters that today's appraisers use and put that into a spreadsheet format, then when you see new characteristics that architects add to a project, such as improved aesthetics or improved functionality or improved energy efficiency, add those characteristics to a new and improved Proposed appraisal method that you and others in this forum might wish to consider offering to a national appraisal organization along with a national association of banks, to help them correct their antiquated appraisal methods that are not presently incorporating characteristics that architects' designs add to a home, increasing its value.
There are others in this forum that are much more aligned to this effort than I am and I hope that they will give you some actual math data about $/HSF that you can use. Of course, you will need some follow-up with such offerers of data, to quiz them as to what features those homes had, their locations and other parameters, to help you quantify the value that an architect brings to the equation.
I applaud your quest and hope that us architects out here actually designing homes that we believe are more valuable than what builders and others are producing will furnish you with the data you need to help us Document this.
I understand that without such documentation that your search will be fruitless and so will the AIA's chance of changing appraisal methods. You are trying to do it the right way: not with rhetoric, but with actual hard numbers, comparing architect-designed home prices (per HSF) against non-architect created homes (per HSF). When well-intentioned architects provide you with numbers (like I just did above), such offerings will of course be lacking in detail. You will need that detail information (location, features, etc) to flush out your study. What you are trying to do is worthy of a Master's or Doctoral Thesis. You are trying to improve today's housing appraisal methods. I believe this is possible, if only those of us who are designing these homes will give you the information you need. Therefore, whenever anyone offers you such information, I suggest that you send them an e-mail, requesting more detailed information, so that the numbers have relevance to your developing Master Housing Appraisal Spreadsheet.
By the way, my wife is real estate broker and does CMAs (Comparative Market Analyses) for banks in our area, and she also sells them. I have compared what she does to full-blown appraisals and don't see much difference in the methods. A lot of the value of the house comes down to what the comparable sales went for, having comparable square footages and features (to the best of the appraising professional's knowledge). And here is what we are all trying to influence: the appraising individual's knowledge.
If people like Michael here can get the information from us he needs to produce an influential document Proving that most architect-design homes do in fact sell for more, this might lead to a line item on the standard appraisal methods sheets that state something like:
WAS THIS HOME DESIGNED BY A LICENSED ARCHITECT? IF SO, ADD 20% TO THE OVERALL VALUE.
I think that is probably what we are all after, isn't it?
So: Let's all help Michael! Send him for sale values on an per HSF basis (or whatever basis he needs it). Thank you, one and all.
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Rand Soellner AIA
Architect/Owner/Principal
Rand Soellner Architect
Cashiers NC
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Original Message:
Sent: 08-03-2012 16:38
From: Michael Gustavson
Subject: Scientific Proof that Residential Architects Are Worth It?
Is there any empirical data showing that architect designed homes have a higher resale value than non-architect designed homes? I'm looking for scientific proof, that hiring an architect to design a home is financially the right decision for a potential client to make. I'm sure this kind of thing has been compiled before, but I'm not finding it anywhere. Does anyone know where data like this may be recorded? Important: I'm talking about scientifically collected data with references, that is well documented and understandable, not opinions, or anecdotes.
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Michael Gustavson
Intern
Madison WI
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