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April 21, 2005 The appraisal came in too low.
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A Rant
When we started to plan our home, David and I wanted to build something that truly reflected our lifestyle. This will be our first home; we weren't able to get into the Southern California housing market by purchasing a home so we decided to build. I decided that if we were going to put in the effort to build, we should build to our taste and lifestyle. At this point, I don't care what the house will look like, I just want to own a home. I question why we did this in the first place.
Just as most everyone on these boards, I don't think that David and I fall into the category of the typical American. I didn't see the need for central air conditioning when we live in an arid climate so I chose an energy efficient evaporative cooler, which is better for asthmatics anyway. I also didn't want to fall in the trap of over-consumption so I limited our storage space to stand-alone wardrobes and a small refrigerator. When it came to deciding on the type of construction for our new home, modular construction made a lot of sense. It has the potential to be more ecological, have higher quality of workmanship and be more affordable than traditional site-built. David and I were able to have a favorable opinion of modular homes because we evaluated them at face value. Yes, it is true that most status quo modulars are not very creative, probably because most people involved in modular construction are limited by the factory environment.
Anyway, I have never been the type of person who cares about the status quo and maybe now I am being penalized for not caring. Our appraisal came in lower than we expected because there are so many unconventional aspects of our project and an appraiser can only place value on something if it's in demand, therefore marketed and accepted. How one chooses to live, that's an integral part of culture. I've always felt that if we allow someone else to decide how we live, we're deprived of culture. Maybe I'm too idealistic.
Appraisal
We needed an appraisal of $400,000 to unlock an extra $20,000 to pay for the budget shortcoming. I know that if our house, completed with all the trimmings, were on the market today, it would easily fetch that price; seeing is believing. However, my opinion doesn't matter because an appriaser can only value our project to the closest thing that he could find in the area. In our case it was this:
It looks like something a christian fundametalist would live in. I shouldn't poke fun, it's a lot nicer than the house I live in and I probably wouldn't complain about living in that house at this point.
This is a fact: Modular homes do not appraise or sell as high as conventional site-built homes in Southern California. Why? Maybe it's because people are so concerned about fitting into the status quo. Maybe because it's because in our society, it is not okay to be poor. Actually, it's okay to be poor, but not look it. Anything that is slightly reminiscent of a HUD factory-built home is not really a home. Beside this outright prejudice, I have dealt with so many comments about our "double-wide." I really don't have anything against HUD factory-built homes anyway. People have many deep-seated ideas about what constitutes a home and it will take a long time or radical improvement in design for opinions to change.
We are going to have to find additional funding outside of our loan. David's being very level headed about all of this so I am going to let him take the lead.
Permitting
The Fire Department employees have been very difficult. It takes weeks to get an answer from them for anything. When I finally sent the last corrections on Monday, I talked to the plan checker and she told me that our plot plan was unacceptable. We worked so long on this one. I started to cry right there at the desk. I was so frustrated and didn't know why I was crying at all because what I felt was anger. She and the desk clerk were so rude that a couple of people were chuckling. I realized that they were laughing because they went through the same thing as me.
The girl at the road department, who shares the counter with the fire department clerk said very audibly, "she's like that to everyone; I can't stand her." The fire department clerk heard her and said, "I really wish they would put us in the fire station, it would be so much easier for us." I wanted to say, It's not supposed to be easier for you, it supposed to be easier for the person building, don't you get it? but I didn't.
The plan checker took pity on me and clearly told me what she needed; she said that she would make an exception and let me resubmit that afternoon. I spent all day incorporating the notes that they needed verbatim on the plot plan then went to Kinko's and resubmitted the corrections. I thought it would take another 15 working days to get an answer from them but the plan checker said she would finish it next week.
The fuel modification plan has been a hassle. David convinced the plan checker at the Forestry Department to let us keep the Eucalyptus trees. So that means I have to redraw the plan as it changes the function and flow of the yard. We also placed some shrubs too close together and have to change that. We're so close to being done with our revisions and we hope to mail them tomorrow. The Forestry Division's approval is required for the Fire Department's approval.
Building and Safety said that they will expedite our approvals as soon as the Fire Department approval is in. Otherwise, it will take them two weeks. I think the Fire Department approval will take two weeks anyway.
Our Grading and Drainage approval is technically in but the plan checker is waiting for Building and Safety's approval before he gives his final approval. I have no idea why everyone is being so difficult. I took comfort in hearing our landlord, who is a sweet old man, say he stopped building houses because he just couldn't deal with the county permitting process.
Our State approval should be in anytime now. In fact, we may already have it but I've been too preoccupied to follow up with that.
Factory Purchase Agreement
We signed the purchase order and final contract with them. We also sent them the first installment of about $21,000 so they can start construction. Here are the final amounts:
Misc.
We have water on the property. It is nice that we can take care of a couple of sick trees now.
I also am working on finalizing our Ikea order.
Our foundation bid may come in a little lower since we have discovered that our foundation is shorter than we originally thought.
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Wednesday
Thanks Greg, this is just one of those tough moments. I know it will work out. It's just really, very frustrating to be in the middle of it right now.
I called Irontown to see if they had the CA state approval and they said that it should be in anyday and that our house is scheduled to start framing on Wednesday! This is really positive news. I am really glad that I don't have to do anything else for the actual house to be built. Everyone at Irontown has been really efficient and personable throughout this process and I am glad it's out of our hands now.
If they don't get the approval by Wednesday, they'll call and the state engineer and get his approval to start anyway. They've done this before and they're pretty sure that it will be in by Wednesday anyway. We only had three corrections from the state.
Sara
yee haw!
keep on truckin y'all! it's good to see some forward progress, despite the high cost.
oh, sara
Sara, Greg is right, just keep your head down and drive on through. It's unbelievable that just because you have some design and stylistic sense, that you have to be put through this very trying process of building a "double wide" (adding insult to injury).
Crista and I have been there. The word "prefab" means "double wide" and "mobile home" and it's not even worth trying to explain it sometimes. I have often just kept my mouth shut and moved along, knowing that it's not worth the effort.
I hear you on the appraiser. I think we were extra lucky in that aspect because our lender was the first owner of the Glidehouse (the Sunset Magazine Glidehouse) and he had relationships with the appraiser, so we didn't have the "modular thing" to overcome. But we will be refinancing in the next couple of months, and of course I am again nervous about the appraisal.
Your house is going to be great, just ride it out. Don't let the permitting employees get to you because you're going to have a great house, the house you want. As I said, just put your head down and drive on through.
A burger, milkshake, fries and a good movie can also help. And some chocolate. I turn to food in times of need. :)
Ami
What is...
A HUD factory-built home?
I have never heard that term in Florida.
it is..
A HUD home is a trailer home. Its built on a steel subframe that has axles and wheels - the trailer. Its not subject to local building codes, but rather a national standard established by HUD.
Ahhhh....
Thanks for the clairification. We call them trailers or mobile homes here.
When I think of HUD homes here, I think of nicely built, Single family homes.
HUD Homes
A HUD home is any home that was initially purchased using a HUD-insured loan, repossessed by the lender because of lack of payment, and subsequently sold to HUD as part of the insurance arrangement. Probably more often than not, these are single-wides/double-wides/trailers/mobile homes, but they don't have to be.
You can find out more about HUD homes (and see listings) at the HUD web site: http://www.hud.gov/. What has always puzzled me is that HUD emphasizes that these homes are intended primarily for owner-occupiers, yet the tools for browsing the listings are geared more towards the investment buyer.
-Steve
Hud Homes....
They are not really geared towards investors.
I have purchased several and currently live in a very nice mid-century modern that I got through one of their auctions. I am currently stalking another MCM, that I plan to bid on this weekend.
I rarely see HUD auctions for mobile homes. They are almost always for detatched SF homes. Ocasionally I will see a condo go up. When the condos are listed in Miami, there is a feeding frenzy.
1) Owner occupants are given priority. If after a certain period of time (usually 10 days), an OO does not bid, then investors are allowed to bid. In Florida first time home buyers are snapping them up.
2) OO's can have HUD pay up to 5% of their closing costs if it is put in the conract. Investors can not.
3) OO's are given more leeway and time to close than investors.
4) They can be good deals. Although they usually go over the starting bid (which is usually low anyway).
yes, ours was hud
our first home was from HUD and was a single family home, not mobile home. we got a great deal on an extreme fixer.
and hud did pay 5% closing cost etc.
I plan to buy more HUD homes when the opportunity arises. we don't see them often around here (santa cruz)
paul
dollars
sara, there was this guy and his gal in an issue of dwell- some two years ago i think - i remember he asked their realtor to find the shabbiest house ever in his town, and when he got it they demolished and built anew. well, they were late, and they were short on financing, and their first appraisal was of course low, etc, etc, but with a clever use of credit they finished the project and had the house reappraised and were able to consolidate the debt load into a decent mortgage because there was something great onsite to be appraised. maybe others here will remember the issue? it was a low cut house, caramellish wood siding, some white too, with a big boulder in front. i'll look for it but i'm off line on weekends so i can't tell you till monday. i remember showing the article to our realtor so he coud grasp what we were trying to do when we bought on frances street, cause he had no clue. so hang in there girl.
and btw i always greatly enjoy your writing.
Boston I think
I remember the house - it was in a Boston suburb.
have used similar methods
we had to borrow $ from family for our fist home; a foreclosure I bought from online auction. I gutted it and financed most of the construction using credit cards.
when we were done we got a line of equity to pay back both family and the credit cards.
it's a vicious cycle though. using the credit cards and then refinancing the home to pay off the cards.
but at least that home mrtg interest is tax deductible.
soon this will all be sorted out and the some bank will surely see the great finished product you'll have.
everything has a way of working out. it MUST.
paul
interest
"but at least that home mrtg interest is tax deductible."
and should be at a lower rate than cards -hopefully.
Boston dwellers
HD,
I was just thinking about that couple! I remember that house and article very well. Thanks for the encouragement.
I think that this may have worked out for the best. We can take out a little money from David's retirement fund (hey, a house is an investment too) and we can borrow a little more from the Musician's Credit Union. I think we'll have to consolidate the small loan amount later as well. If we did get the appraisal we wanted, we would have paid $6,000 in additional closing costs for re-writing the loan. That would suck.
Paul, I appreciate hearing about your experience. It's nice to know that other people do unconventional things in order to own a home. I am also trying to keep this in perspective. Our friends, in our age group, feel very pessimistic about the possibility of ever owning a home in L.A. Granted, we've opted to live in the sticks in order to buy land. However, many of them would love to be in our situation, on their way to owning a home. My sister just moved to Seattle because she knew she couldn't afford to own a home in L.A.!
Sara
Empathy
Sara,
While I can't offer much in the way of advice regarding how best to proceed, I can at least offer empathy. Our situation is in many ways diametrically opposite to yours, yet we also face the problem of too low an appraisal.
We're trying to build a house in southeastern Ohio, where a nice double-wide is an above-average countryside home (we're renting one right now, and apart from the fact that the quality of construction can charitably be described as "bare bones," it's well-insulated and pretty comfortable). If you want to build, you can buy a very nice lot in town (Athens) for about $20,000, and rural land can be gotten for as little as $1000/acre, depending on how far from town it is. (We purchased 82 acres of mature forested land about 10 miles south of Athens for $87,000.) Inside the city limits you have to deal with fairly typical zoning requirements and code enforcement, but where we're planning to build, the only required code compliance is with the county health department for the septic system, and that costs a whopping $150, which pays for two visits by the inspector (before and after).
Instead, our problem is that we're trying to build something that isn't a double-wide, and isn't yet another McMansion. We're trying to build a fairly small (1900 sq ft), environmentally sensitive, architect-designed house, and that turns out to be so foreign to the local appraisers that they have no idea how to appraise it.
The first lender dropped us like a hot potato when they discovered that the house we wanted to build was "non-conforming." (In most cases, "non-conforming" means that the prospective owner has a credit problem or some such; in our case, it meant that the house we wanted looked like nothing they'd ever seen before.) The second lender said, "Sure, no problem; we do this kind of thing all the time." At least until the appraisal came in at $310,000, with our estimated construction costs at $375,000. It turns out that all of the "good" stuff we were planning on putting in, things that added tremendous value in our eyes, such as high-thermal-efficiency windows and extra insulation in the walls and ceilings, a geothermal heat pump for heat and A/C, etc., simply do not show up in the appraisal.
What we've decided to do is buy a more conventional house, live in it for five years or so, and then try again, once we've built up enough equity to act as a cushion between the appraisal and the actual building costs.
-Steve
Financing
Try Mid-coutry bank. The love owner builders and they are geared towards energy effiecnt building. They offer 100% construction loans including land.
Wow Steve
That is a real pickle. I definitely see the value in pursuing your dream home; what you've described sounds amazing.
Sara
persevere
persevere Sara - we are all pulling for you