Contract, New Construction

[nstanbru]

Then the Doc Stamp protocol also s intriguing. The formula to determine selling price of a new construction SFR, per various Title offices is:

Doc Stamp divided by 1.1 multiplied by 1000 = Sales Price

Wrong formula. It's doc transfer tax divided by $.55 multiplied by $500. The doc stamps are based on $500 increments, with the final number rounded up.

 

[shrubberyvaluation]

What the sales agreement says an appraiser can or not do is irrelevant.

In any case you should not be adjusting for lot premiums, you should be adjusting if there is a market reaction for the site.

 

[Joe Flacco]

In any case you should not be adjusting for lot premiums, you should be adjusting if there is a market reaction for the site.

I don't really do big builder new construction. But typically, when there is a lot premium, it is because it is a much bigger lot, or some other factor like it backs to woods or something like that. And it is never the double the value of the land for no reason.

 

[Joe Flacco]

For the big builder new construction, I like to breakdown how they came to the sale price for the subject and comps.

 

[alebrewer]

A for the amount of "incentives", which I will assume are actual concessions of some sort, the adjustment is dollar for dollar. Others will argue but reality says if I kick back 10K I got 10K less, so the price I got just went down by 10K. What would you do if that 15K "incentive" was a new car? Adjust dollar for dollar for the comps based on the concessions for each sale. The "incentives" in the contract are meaningless. Just appraise it based on the comps. Adjusted for sales concessions. Easy.

The reason I don't adjust dollar for dollar is because monetary incentives are not the only incentives - yet they're the only incentives that affect a sales price (I say I because what others do is not my business). For example, a seller may offer financial incentives for a slightly quicker sale - doesn't necessarily affect the sales price, as the seller isn't expecting to recoup that incentive - it's a tradeoff for settling quicker. And this is borne out IRL. Two sales - nearly identical properties, and nearly identical sales prices. One sold in 2 weeks with $5k in concessions and one sold in 4 weeks with $0 concessions. Marketing time for this particular market is < 30 days. If you adjust the first sale for concessions, you're artificially lowering the adjusted value of that sale.

Oh - and also because you're signing a certification that contains a definition of MV that states (in part): "... Any adjustment should not be calculated on a mechanical dollar for dollar cost of the financing or concession but the dollar amount of any adjustment should approximate the market's reaction to the financing or concessions based on the appraiser's judgment."

 

[Terrel L. Shields]

Any adjustment should not be calculated on a mechanical dollar for dollar cost of the financing or concession but the dollar amount of any adjustment should approximate the market’s
reaction to the financing or concessions based on the appraiser’s judgment.

Oh - and because you're signing a certification that contains a definition of MV that states (in part): "... Any adjustment should not be calculated on a mechanical dollar for dollar cost of the financing or concession but the dollar amount of any adjustment should approximate the market's reaction to the financing or concessions based on the appraiser's judgment."

The problem I've seen is the rarity when a "concession" is not a dollar for dollar impact upon the seller's resulting net from the sale. AND, that it deviates by about that amount from the comparables where no concessions are made. Here we only recently have seen Horton et al come to town and offer incentives - noticed one the other day - offering 4.99% interest loan from their preferred lender. Well, the lender isn't going to leave money at the table so the developer is paying down points - and the real (inflated) price reflects that expense of the builder-developer. It seems to be the curious case where buyers are enticed to pay more with lower interest rates than the seller to lower the price accordingly. I am waiting for the return of 2008 when such incentives included your choices of either a world cruise, bass boat, Hummer, one years cleaning service or six months making your mortgage payment. Folks, that's a no brainer. No matter if 100% of builders offers that same incentive, it is money right off the top. Cash equivalent value... Market Value defines

"payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto"

I would argue any non-cash sale that has concessions by definition is not "in terms of financial arrangements comparable thereto". It must be adjusted and that adjustment is rarely anything but dollar for dollar.

 

[alebrewer]

The problem I've seen is the rarity when a "concession" is not a dollar for dollar impact upon the seller's resulting net from the sale. AND, that it deviates by about that amount from the comparables where no concessions are made. Here we only recently have seen Horton et al come to town and offer incentives - noticed one the other day - offering 4.99% interest loan from their preferred lender. Well, the lender isn't going to leave money at the table so the developer is paying down points - and the real (inflated) price reflects that expense of the builder-developer. It seems to be the curious case where buyers are enticed to pay more with lower interest rates than the seller to lower the price accordingly. I am waiting for the return of 2008 when such incentives included your choices of either a world cruise, bass boat, Hummer, one years cleaning service or six months making your mortgage payment. Folks, that's a no brainer. No matter if 100% of builders offers that same incentive, it is money right off the top. Cash equivalent value... Market Value defines


I would argue any non-cash sale that has concessions by definition is not "in terms of financial arrangements comparable thereto". It must be adjusted and that adjustment is rarely anything but dollar for dollar.

As I said - I use the term 'I' because it's not my business what other folks do. That said - if you're truly analyzing the impact on price of the concession - and you find that the amount of the adjustment should be the same as the amount of the concession, you're still adhering to the document you're signing. If you're simply adjusting concessions 'dollar for dollar', you're not adhering to the document you're signing...

 

[Terrel L. Shields]

If you're simply adjusting concessions 'dollar for dollar', you're not adhering to the document you're signing...

Well...actually I don't do FNMA et al and FNMA MV definition

The definition of market value assumes that the price is not affected by undue stimulus, which would allow the value of the real property to be increased by favorable financing or seller concessions.

 

[Mark K]

I would argue any non-cash sale that has concessions by definition is not "in terms of financial arrangements comparable thereto". It must be adjusted and that adjustment is rarely anything but dollar for dollar.

This^^^

What some appraisers apparently are unwilling or unable to understand is that the 'market reaction' to a $ is a $. All buyers, sellers, (the market) and brokers understand this but for some reason some appraisers want to try to deny this fact. F/F would prefer that appraisers essentially ignore the $4$ reality so that appraised values can be high enough to grease the lending wheels and keep the market rolling along. Its all part of F/F's shell game.

 

[Surf Cat]

Who was the AF member who stated "dollar for dollar and no one will hollar" years ago all the time? Was that CanNative?