Re: Unit pricing
From: David L. Mandel (75407.2361compuserve.com)
Date: Fri, 31 Mar 95 01:14 CST
In response to Diana's question from Jewell Hill Coho:
>We are trying to establish criteria which will help determine the pricing 
>for units.

>How did you apportion the cost of land, common facilities, unit construction
>and soft costs relative to the size of units and sales price?

>Any other suggestions or thoughts for this issue??


        It was a can of yucky worms for us. Our multiple difficulties 
included:
        @ An initial pricing schedule set by someone at our hired project 
manager's office who made a guess based on early cost projections and what he 
thought relative market values would be for the various-size units.
        @ Major cost increases along the way that necessitated lots of 
cutbacks in plans and much higher prices for everyone than the initial 
estimates, making us all grumpy.
        @ A serious schism in the group. About the only thing the two sides 
agreed on was that our prices had to add up to our costs, since we as 
self-developers had taken on all the risk of construction. Beyond that, we 
were divided into two camps. The naive idealists (my biased label) who 1) for 
a while believed (wrongly) that the initial price schedule was based on 
relative cost of construction and supported that as the basis for pricing; 2) 
rejected the idea of appraisal-based pricing, calling that "capitalist" and 
(correctly) noting that real estate appraisal is far from an exact science; in
fact it is very subjective and often manipulated depending on the desired 
outcome according to the person paying for the appraisal; and 3) nevertheless 
wanted to keep the long-familiar original projected prices, adjusted 
proportionately for cost overruns, even though their origin was a guesstimate 
of -- yep -- market value.
        The other camp, while conceding the subjectivity of appraisal, 
nevertheless rejected any attempt to apportion construction (and other) costs 
in a supposedly accurate way. Too complicated, we argued, and besides, it's a 
known truth that larger units are considerably cheaper to build per square 
foot than smaller ones, yet may not fetch a correspondingly high price on the 
market. Instead, we favored consulting appraisers and other real estate 
professionals, add our own input regarding special cohousing factors and come 
up with the best estimate we could of relative market value. No, I don't like 
the fact that housing is a commodity in our capitalist society; in fact I 
despise it. But given that it is, I would prefer to try to put all our members
on equal footing when it comes to protecting the value of what for most of us 
is the largest investment we'll make in our lives. Eventually, most of us will
probably resell our units, and I want to make at least an honest effort to 
prevent some from reaping windfalls while others get screwed.
        This debate became particularly bitter when those of us in the second 
camp sought to assign differentials to certain factors, like whether units 
have private back yards (a plus) or whether they are sandwiched between two 
other units (a minus) as opposed to being on an end. The naive idealists went 
nuts over this, but in reality, the various appraisers we consulted were far 
more unanimous about these differentials than about the absolute value of the 
units. It just seemed unfair to us realists to charge the same for a 
three-bedroom end unit with a back yard as a three-bedroom sandwiched unit 
with no back yard -- and our project includes both these examples.

        In the end, we compromised, adjusting the relative prices most of the 
way toward the proportions of the median appraisal figures; and making 
allowances for back yards and sandwiched units, though not as much as the 
appraisers thought appropriate.
        The best part is that everyone felt pretty OK in the end and we now 
live here. But at times, the issue can still provoke an argument, particularly
in my household, where my partner, Susan, who was on the other side, just 
looked over my shoulder as I was writing this and may now well want to add her
------ opinion. So stay tuned. I hope some of you future cohousers find this 
helpful.

David Mandel, Southside Park Cohousing 
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