This message has been cross posted to the following Discussion Forums: Project Delivery and Residential Knowledge Community .
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Very few people buy property with cash. Their ability to secure lending is all important to our profession. The appraised value of a property is a major component in the lender's decision making process. Our current system for valuing property puts the majority of the weight on the area and "comparable" structures, yet very little weight on the individual's effort. This has essentially created a system that rewards those who strive for the lowest common denominator. This is why mass produced cheap boxes monopolize the market for new homes.
I have a client who, unfortunately, needs to sell their house. This house was designed for accessibility with all five exterior doors wheelchair ready and seamless transitions between all flooring, inside and out. They went the extra mile with insulation and high efficiency equipment. The design includes a 9ft cantilevered roof and other atypical features that were clearly by a professional and not from a plan book. It's fully clad in 1/2 brick and 1/2 stucco. The house has also been in publications and on TV. The owner has had several enthusiastic buyers back out at the last minute because the bank(s) had no way to justify the price these people were willing to pay. Why? Because there is nothing to compare this house to. They look at the recent built cookie cutter boxes with hardie board siding and say this is the same thing per sq ft. My client bothered to do a much better job and the bank only sees square footage and "comparable" houses in the area. They got a $5000 bump for using $20K more in stucco and brick. No add for better insulation or equipment. No add for using a professional. No add for the 4000 gallons of cisterns. The few adds you get never come close to the actual cost of installation, so why would you add high quality at a net deficit? The appraisal forms have very few "adjustment" categories, so the vast differences are equalized for simplicity.
One house is clearly built like a BMW, using more advanced design and higher quality materials, while the other is a simplistic box. I mean four sides. This is like a Honda scooter in comparison. Aside from style and taste, one is clearly more complex and more expensive to build. One purchased more expensive products while the other went cheap. This way of homogenizing areas by value makes it difficult for anyone to step outside the box. Because of this mentality, development is greatly hindered. You can't build a really nice house on a street with houses less than 1/2 the value. The first guy to start developing a rough area always loses their shirt.
The timing won't get any better to start revolting against this brain dead system that not only limits us to a single volume based market of low end houses, but it helped tremendously in causing the housing crash by encouraging way too much volume while over rewarding zero merit with unjustified, skyrocketing value. The builders and real estate agents I've been talking to all love the idea of rewarding individual effort to create BMW, Armani, and other markets in addition to the sole Walmart market.
I really believe it's as simple as convincing the banks that we are all missing out on multiple markets of quality and competition. A more vibrant market will be far more stable and far more lucrative for everyone. The banks will have to justify raising values before the entire industry can hum along again and trying to do this by over-building cheap boxes is going to be a self-defeating process. Placing more weight on individual merit will encourage people to improve their homes and put more expensive goods into the building. This in turn helps the economy as a whole. As it stands now we all use a very limited palate of low end goods to build most houses. If someone wants a ridiculously expensive steel stair and other goodies, then their million dollar purchase will take 20 years to catch up in value. If someone wants a concrete framed house, good luck comparing it to sticks. Why would you want to prevent people from buying expensive things when they have the means to? Just because someone wants better things, they can't live on the street they want to? It's UnAmerican! It's AntiCapitalist! It must change!
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Eric Rawlings AIA
Owner
Rawlings Design, Inc.
Decatur GA
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