Difference in appraisal value between regular & prefab?

Question

I have a question for you appraisers out there. I'm working on putting together a deal where I build a new single family home and sell it.

Right now, it seems very cost effective and profitable to do this using a pre-fabricated home... where the materials are cut in a factory, then shipped to the job site, and the home is stick-built on site.

Is there any difference in the appraised value of these pre-fabricated/pre-engineered homes?

If there is a difference, what % up or down is it from a traditionally built new home (generally)?

This would be a one-off spec build on a vacant lot between other existing homes in Richmond CA or Oakland CA. Not a tract development or anything like that.

Eric Teran · Answer

Lets start with the appraisal. When you are building something on a vacant lot or a tear down an appraiser might have a hard time understanding what will be there. They can only judge the property what is shown on the plans. The more detailed plans (showing areas, finishes, sizes, etc) you will get a better appraisal. They only use a site plan, floor plans and drive around the site. If the banks appraiser is not good at this sort of thing it might come out lower than expected. I am currently building a modular house for my family. I had two appraisal 5 weeks apart from different banks. With the same set of information one valued the house at $700k and the other at $630k. So there you go. Just give them as much info as possible and hopefully you get a better appraisal.

This was for the construction loan. At the end of construction when you actually have a house it will be appraised just like any other home. @Russell Brazil is correct in that it all depends on the quality at that point. I guess it also depends if you built to match your neighborhood as well.

Onto modular construction. Why not do full on modular construction? See this video. I've been an Architect for 15 years and I finally built modular for my house. There is no reason not to build modular. You can build the entire house in 2 months if you are well organized and have the funds up front (not waiting for the construction loan wire). I will be done in 100 days. I was hoping 80 but I messed up on some scheduling. Mainly with the electric company.  That is a story for another day. If you want a day to day on my adventures check out my website for my daily blog on building with modular.

I've already gone into it in some other forums but there are no real negatives in modular construction. If you are going build a $10 million home then it might not work. However, for single family homes under a million dollars, duplexes up to fourplexes or additions this is the way to go. Remember, even if the cost is the same (which it won't) you save a lot of time. Time is Money!

Account Closed send me a message if you want to hear some .... many .... of my mistakes doing this the first time. The second time is always easier or just hire the GC to do it all. That way you will sleep at night.

Good Luck.

DG A. · Answer

@Rogers Smith,

There's a flipper / spec builder around here that built a house in West Oakland (transitioning neighborhood), He bought the lot for ~$150k, built a house on it for $450k, then sold it for $900k.

The way to get rich in the bay area is to be a contractor!

Hell, if you can build to building code around here, it'd be worth it for me to pay for plane tickets for you and your whole crew to fly out here and put this thing together. Literally, it would probably cost me less. Everything is crazy expensive in the bay area, because it costs so much to live here...

Pavan Sandhu · Answer

hey Daniel! Pre fabricated homes will not have a lower appraisal than something of similar size and location. Some pre fab homes are much more efficient and are better selling points to the end consumer. If you'd like to talk more pre fab and net zero tactics feel free to reach out.

Kenneth Davis · Answer

Modular appears to be the future finally. There are high end prefabs being in built in Santa Monica CA by livinghomes.net with prominent architects.

Rogers Smith · Answer

Thanks @Daniel Gonzalez, but I gave up flying a long time ago. You certainly have a tiger by the tail building a spec in California. A lot of money can be made, but a lot can also be lost with the inversion of a single stock option. Good luck!

DG A. · Answer

@Josh Cuthbertson,

Essentially it's the homes listed here: http://www.caprecut.com/floorplans -- from what I understand, they cut the wood, and the drywall, and the flooring. And they send it to you on a truck. You store it on the job site, and pull the materials out of the container as you build. At least, this is what was explained to me.

--

So I think it's the 2 x Wood, and not the SIPS paneling.

Account Closed · Answer

An efficient framing crew can cut all boards on site and build just as quickly

Russell Brazil · Answer

The Quality of Construction scale is an aspect of the appraisal, but unless it is all put together like crap, it will probably be at the highest end for QoC.

Karen Margrave · Answer

In looking at the website it says "n our lumber packages we can supply all the walls (inside & out), windows (Milgard), hardware, roof system (trusses or rafters), roof plywood, T1-11 siding, lap siding (LP or Aurora) barge, fascia, trim around doors, windows, corners, rake & eve. On two-story or higher we will supply the floor system & floor plywood."

Therefore; when comparing costs, make sure you're comparing apples to apples. I've never dealt with prefab, modular, or anything like that, so have no idea on values, etc.

There are some really cool products on the market though, in many different price points. Have you ever seen these?  Blu Homes

Rogers Smith · Answer

@Daniel Gonzalez That's an interesting concept. I went to the website you mentioned and it shows a video blacking in a house in 12 days. The framing process will normally take us 4-5 weeks. But the pricing seems a bit high, especially for my market. My framing and blacking in runs around $30,000. The 2500 square foot plan I reviewed from caprecut was over $100,000. I must be missing something.

Difference in appraisal value between regular & prefab?

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