The reason why most Architects have a hard time understanding what value really means in the market place is because we choose to fight the system used to determine real market value. When we design end user houses, we avoid the judgement of the free market. The term "sales history" doesn't resonate well with Architects because we design mostly houses for wealthy end users which always sell in the market place as "used", eventually. The Spec builders always sell their houses as "new". The cost per sf is higher for the new house than it is for the end user house that is eventually sold as used. This makes our houses appear to be less valuable than a builder box when it comes to sales history and the market price per sf. I designed a spec house that sold for almost a million dollars in 2006 and was later sold as used in 2010 at more than 30% less. New went to used in a few years and the value was almost cut in half. Now the housing crash didn't help, nor did the short sale when Corp McDs dumped the house as quick as possible when relocating their employee. Had I designed it for the end user directly and had I never been known as the first and possibly only Architect to design a million dollar house to sell at market in my neighborhood, I would be forever cursed as the guy whose Architectural design sold for the least per sf in the last decade, including tear downs. I'm blessed when it sold at spec, cursed when sold used. This is the kind of story people in an American Idol society love to remember. The professional gets bested by the amateurs. The same exact house made me the million dollar Architect and the schmuck who can't design a house of good quality (i.e. the price per sf) according to when it entered the market place and how. Nobody cares about when and how, they only care about the final sales figure.
Below are some Laconic talking points concerning the value of Architecture in the market place:
If we judge two houses with the same check list of items, how do we determine which one is better?
A check list of the same items can only be made better when arranged in a better way, this is also known as the design.
Our profession depends on design making the difference. If design makes the difference, then how can we prove this?
Who decides if one design is better than another? The consumer decides, not the appraiser or the bank.
Beauty is only one component of desirability. Functionality and cost are as well.
What consumers desire more in a specific arrangement of the same parts (design) cannot be represented by averaging the success of a community of competitors, nor by creating a more complicated check list of value for it's parts.
Spec houses are the only new houses as far as the market place is concerned.
A spec house is a product that a builder takes out a business loan to create and this product is sold directly to the consumer as a new, off the shelf item including a one year warrantee.
An end user house is a personal possession that a private owner commissions to be built.
An end user house can never be valued in the free market as a new item since the possessor is the facilitator of it's creation.(This is like valuing a car you made in your garage. We will only know what it's worth when someone buys it, but the next BMW coming out in 2012 already has an inherent value because the company has an established sales history.)
BMW is a spec builder and so is Armani and Wonder Bread.
Architects must sell new houses (i.e. spec houses) if they want to compete for new house sales histories.
We cannot convince the market place that design makes the difference unless our sales history can prove it.
If it takes an average of 10 years for Architectural end user houses to be sold at market, then it can take a long time to establish a sales history as a designer of used end user houses.
The only reason a new BMW can be sold at a higher price than a new Honda is because of their sales history. Same holds true with their used cars.
The key to the quality of profitable new construction is based on how much the bank will lend per sf. The remainder comes from either your pocket or the buyer's.
End user houses can never have a new sales history, but are valued as new by the lender when considered for a construction loan.
If spec houses are the only houses on the market capable of having a new sales history, then how can the value of a new end user house be established without comparing it to spec houses?
Who is more likely to invest more money than the appraised value of a new house, a spec builder who has to sell it right away or lose profit OR the end user who intends to live there?
How can a spec house be compared equally to an end user house, no less more favorably? This is the question that has us all scratching our heads and the number one reason we avoid the judgement of the market place by designing unique end user items that can only be sold as used rather than products created by companies with a business model and directly sold at market as new items.