An appraisal of a model(s) provides a market value of a particular home in a given development, considering the cost of construction and the market value of the model’s unique features and floor plan on a typical lot. Normally, a Bank will obtain an appraisal for each model or floor plan that a borrower is planning to build and offer for sale. The model appraisal is based on the price of a “base” lot in a particular development without consideration to the costs of, or value attributed to, specific options, upgrades, or lot premiums.
If the Bank is financing the construction of a residential tract development, an appraisal of the model(s) provides relevant information for the appraiser to consider in providing a market value of the development. The value attributable to the models is used as a basis for estimating a market value for the tract development by reflecting the mix of units and adjusting for options, upgrades, and lot premiums. The market value should also reflect an analysis of appropriate deductions and discounts for holding costs, marketing costs, and entrepreneurial profit.