We can say thank you to the Governator, Arnold Schwarzenegger, that starting on 1/1/2011 there will be a new mandatory green building code in California called "Cal Green". While the Cal Green code is not a revision of the entire building code, it affects the implementation of all areas of the code and is a new "book" for the stakeholders to learn, and for owners and contractors to perform to. Like most other California code revisions, it is expected to be copied and modeled after over the coming period in other parts of the country as we move from optional green building standards managed by non-governmental agencies and non-profits to mandatory standards in most states.
California is a fluid building environment and that fluidity is ironic considering the highly structured nature of the building code and local building regulations. This fluidity comes from the myriad or risks and responses created when you have almost 37 million people living in one state, overzealous health and safety officials and a myriad of other layers of state and local enforcement, and contractors and owners making conservative interpretations of the codes.
Commercial construction has widely adopted the USGBC's LEED standard when mandated by the cities or required by project developers who are staying competitive in their markets, but most residential construction is not completed to a green building standard.
It is not that there are not residential green building standards, it is because there are too many of them, and the market does not have a clear incentive to use one. Green building standards have multiplied to the point where it is too diluted for residential consumers to understand the differences between the prohibitively strict LEED for Homes program versus the more laissez faire home builder's association National Green Building Standard. For an recent and extensive comparison of green building standards and their implementation across the country, see Alicia J. Miller's thesis here.
When private industry self-regulates a market will form and that market will eventually become competitive. In the case of standards competing in the free market the consumer loses confidence that private groups are being fair intermediaries of the green building standards between consumers and the businesses that do the development work. Even the so-called "non-profit" companies that run green standards are funded by the memberships of private businesses, many of which are only members because of the presumed economic benefit to their firms.
Only government's prescriptive control of standards can flush out the consumer confusion of the diverging standards by getting rid the market for their product, an over-supply of standards. By its nature, that regulation will both get rid of the best and worst types of private label green building codes with standardization as the result.
If you want help learning more about the CalGreen code or building in California using one of our building systems, please contact us or visit our green building modular homes site.
Tuesday, September 28, 2010
Tuesday, September 21, 2010
10 Strategies For Improving Your Chances of Getting a Fair Appraisal
The lack of motivated buyers makes getting an appraisal with a high enough valuation to match up with builder's expenses and a reasonable profit almost impossible to accomplish. This list of things to do when seeking a fair appraisal is critical reading if you want to get to the end goal of buyers, builders, lenders, and all of the other project stakeholders. We all want the same thing: TO ACTUALLY BUILD SOMETHING!
http://www.builderonline.com/business/10-strategies-for-improving-your-chances-of-getting-a-fair-appraisal.aspx?cid=BLDR100921002
"1. Don’t be afraid to talk to the appraiser. “Communicate, communicate, communicate,” Mitchell asserted. “Last year, at this time, we were 180 degrees from here. We were told not to communicate, not to have any contact” under the new rules, but that has changed as the guidelines have been implemented. Builders “can’t ask for certain numbers to be targeted [in the appraisal], but they can communicate in a lot of different ways” with an appraiser.
2. Supply all potentially relevant data. “Basically, you can provide almost anything that you can think of that is going to support the value of the house,” Mitchell said. This can include information on the market and absorptions as well as property specifications, home plans, and product details for the home or project in question. You may also want to give the appraiser copies of recent HUD-1 statements if they aren’t in the land records yet or examples of recently executed contracts. Allen W. Gardiner, who provided the appraiser perspective on the NAHB/Builder Partnerships webinar, agreed. “One of the biggest mistakes I find is that builders hide data,” said Gardiner, who is vice president of residential at Jackson Claborn, a Plano, Texas-based real estate consulting and appraisal firm. “I would encourage you to provide all relevant data. If it was a low sale, let [the appraiser] know and explain how it is different from the others.”
3. Make note of all communication (written or spoken) with an appraiser. “Contact the lender immediately” if you have concerns about an appraiser’s experience or expertise, according to Gardiner.
4. Be realistic about distressed sales being used as comps. “If an entire market is made up of short sales and foreclosures and all the listings out there are also short sales and foreclosures, that may be representative of what the market is today,” Gardiner said. “On the flip side, if you are in a market that is improving or stabilizing and there are still some short sales out there, that doesn’t necessarily mean [distressed sales are] what is driving the market.”
5. Warn buyers that extreme options may not appraise at their value and protect your interests accordingly. “If you’ve got someone stepping out of the norm, then you absolutely as a builders should have concerns about that,” said Mitchell, who advises warning a customer that such upgrades may result in a problematic appraisal. If the buyer insists, then Mitchell’s firm will do so—with a condition. “If you still want those items in the house, then we have to have an addendum to the contract that says you acknowledge that this house will likely not appraise for what the cost of this house is that we have contracted [to build for you] and that [a low appraisal] is not a valid reason for [the buyer] to void the contract or ask to have the price reduced.”
6. Request a copy of appraisal. You’ll need to request this from the lender, but “usually a good lender will release that appraisal for you,” Mitchell said. Once you receive it, review the document for errors and accuracy. Ask for the criteria and comps used in determining the value, which can vary from lender to lender. For example, a bank may want comps located within a certain distance of the property or comps from certain number of sales within the past 90 days, a competing builder, or even a listing or a pending sale, according to Gardiner.
7. If getting an appraisal on a green home, provide the appraiser with the net present value of the savings projected due to the energy-efficient features in the house. The NAHB says its members have been successful at getting those values incorporated into some new-home appraisals. But green builders—and their buyers--should probably brace themselves for some unpleasant surprises. “I think you’re really limited in today’s market to those things that create savings on the energy bill,” Mitchell said in response to a questioner. “Unfortunately, I don’t know of any way to value sustainability. That is a much more difficult process.” Gardiner agreed. Despite the growing interest in green building and energy efficiency among many consumers, “we don’t see much of a premium for those items” in the resale home market, he said.
8. Adjust your expectations for the appraisal based on the lender involved. “A national bank using an appraisal management company is going to be way more restrictive than a local bank in terms of its guideline for its appraisals,” Gardiner warns.
9. Be prepared to encounter worst-case scenarios. “We’ve heard about lenders requesting liquidation value [on appraisals]—not allowing for buildout value or ‘highest and best use’ value,” Mitchell warned. If you do, let NAHB know by emailing the organization at appraisals@nahb.org.
10. If you’re doing a workout, find out everything you can about the health of your lender and whether they have flexibility to work with you. Tell them your cost of capital. Find out how they plan to classify the loan so you can provide appropriate data to lenders and appraisers. Detail how you will handle the project so that the buildout value will be greater than the liquidation value. “All of these things will help you create a workout plan that works for the lender” and improve your chances of getting the deal done, Mitchell said."
http://www.builderonline.com/business/10-strategies-for-improving-your-chances-of-getting-a-fair-appraisal.aspx?cid=BLDR100921002
"1. Don’t be afraid to talk to the appraiser. “Communicate, communicate, communicate,” Mitchell asserted. “Last year, at this time, we were 180 degrees from here. We were told not to communicate, not to have any contact” under the new rules, but that has changed as the guidelines have been implemented. Builders “can’t ask for certain numbers to be targeted [in the appraisal], but they can communicate in a lot of different ways” with an appraiser.
2. Supply all potentially relevant data. “Basically, you can provide almost anything that you can think of that is going to support the value of the house,” Mitchell said. This can include information on the market and absorptions as well as property specifications, home plans, and product details for the home or project in question. You may also want to give the appraiser copies of recent HUD-1 statements if they aren’t in the land records yet or examples of recently executed contracts. Allen W. Gardiner, who provided the appraiser perspective on the NAHB/Builder Partnerships webinar, agreed. “One of the biggest mistakes I find is that builders hide data,” said Gardiner, who is vice president of residential at Jackson Claborn, a Plano, Texas-based real estate consulting and appraisal firm. “I would encourage you to provide all relevant data. If it was a low sale, let [the appraiser] know and explain how it is different from the others.”
3. Make note of all communication (written or spoken) with an appraiser. “Contact the lender immediately” if you have concerns about an appraiser’s experience or expertise, according to Gardiner.
4. Be realistic about distressed sales being used as comps. “If an entire market is made up of short sales and foreclosures and all the listings out there are also short sales and foreclosures, that may be representative of what the market is today,” Gardiner said. “On the flip side, if you are in a market that is improving or stabilizing and there are still some short sales out there, that doesn’t necessarily mean [distressed sales are] what is driving the market.”
5. Warn buyers that extreme options may not appraise at their value and protect your interests accordingly. “If you’ve got someone stepping out of the norm, then you absolutely as a builders should have concerns about that,” said Mitchell, who advises warning a customer that such upgrades may result in a problematic appraisal. If the buyer insists, then Mitchell’s firm will do so—with a condition. “If you still want those items in the house, then we have to have an addendum to the contract that says you acknowledge that this house will likely not appraise for what the cost of this house is that we have contracted [to build for you] and that [a low appraisal] is not a valid reason for [the buyer] to void the contract or ask to have the price reduced.”
6. Request a copy of appraisal. You’ll need to request this from the lender, but “usually a good lender will release that appraisal for you,” Mitchell said. Once you receive it, review the document for errors and accuracy. Ask for the criteria and comps used in determining the value, which can vary from lender to lender. For example, a bank may want comps located within a certain distance of the property or comps from certain number of sales within the past 90 days, a competing builder, or even a listing or a pending sale, according to Gardiner.
7. If getting an appraisal on a green home, provide the appraiser with the net present value of the savings projected due to the energy-efficient features in the house. The NAHB says its members have been successful at getting those values incorporated into some new-home appraisals. But green builders—and their buyers--should probably brace themselves for some unpleasant surprises. “I think you’re really limited in today’s market to those things that create savings on the energy bill,” Mitchell said in response to a questioner. “Unfortunately, I don’t know of any way to value sustainability. That is a much more difficult process.” Gardiner agreed. Despite the growing interest in green building and energy efficiency among many consumers, “we don’t see much of a premium for those items” in the resale home market, he said.
8. Adjust your expectations for the appraisal based on the lender involved. “A national bank using an appraisal management company is going to be way more restrictive than a local bank in terms of its guideline for its appraisals,” Gardiner warns.
9. Be prepared to encounter worst-case scenarios. “We’ve heard about lenders requesting liquidation value [on appraisals]—not allowing for buildout value or ‘highest and best use’ value,” Mitchell warned. If you do, let NAHB know by emailing the organization at appraisals@nahb.org.
10. If you’re doing a workout, find out everything you can about the health of your lender and whether they have flexibility to work with you. Tell them your cost of capital. Find out how they plan to classify the loan so you can provide appropriate data to lenders and appraisers. Detail how you will handle the project so that the buildout value will be greater than the liquidation value. “All of these things will help you create a workout plan that works for the lender” and improve your chances of getting the deal done, Mitchell said."
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