As it happens, I reviewed an appraisal on that street (same side, even) that was dated in late May of 2005. This home was a smaller model (in the 3,900 SqFt range) and also had an original purchase price of just under $1MM in mid 2004. The appraisal I reviewed came in just under $1,400,000, and based on my review of it I came to the opinion that value nominally was within reason. My review expressed a value opinion as a range for the property involved at $1.3MM – $1.4MM, and this appraisal came in at the upper end of that range.
Considering the property we’re talking about is 700 SqFt larger (which probably includes the casita) than the one I was reviewing, it is quite possible that most appraisers would have developed an opinion of value in mid-2005 for this property in the $1.4 – $1.5MM ranges. That’s what the sales in that project were doing at the time. Besides the sales data that were listed in the appraisal report I reviewed, I remember finding a significant number of other sales data during that time period (late 2004 – early 2005) that demonstrated the same value trends.
You would want to bear in mind that new construction sale prices during that period of time were commonly being negotiated 6-9 months or even in excess of a year prior to completion of the home and close of escrow. the Semi-p[ro flippers were camping out at the sales offices on the eves of the release dates for these phases and snatching up the available listings on the day of release, hoping to sell the units off in a double escrow on the date of completion.
Unlike a lot of other areas, that area was still increasing in pricing up through the end of 2005. So the disparity between a pre-construction contract price of $1MM and a value opinion of $1.5MM 24 months later and near peak pricing is not completely crazy to think about. Especially when considering all the other stupid moves these agressive investor/flipper types were doing at the time.
