Any new construction review appraisers out there?

[NC Appraising]

I would like to get some feedback on what review appraisers are seeing on new construction homes.

***I am only speaking of new construction that are located in tract PUD's and/or being built by national or regional home builders.****

1. Many builders are offering around $15k-$25k in closing costs, rate buydowns, etc. How are appraisers handling this? Are they making full adjustments, partial, or none at all and stating they are typical for the market?

2. If they are not making any adjustments and stating they are typical for the market, what are you, the review appraisers stating or commenting?

 

[CGinMN]

I can't speak to what appraisers are doing, but what I would be doing is comparing these transactions to cash sales, including from other builders, to see if an adjustment is needed. Or even analyzing re-sales. Since the concessions often require that you use the builder's mortgage company, and the rate buydowns often go unreported, you can also compare sales from different mortgagees. Ultimately if the information is not being reported in the MLS, it will be tough to derive any adjustment.

 

[J Grant]

I would like to get some feedback on what review appraisers are seeing on new construction homes.

***I am only speaking of new construction that are located in tract PUD's and/or being built by national or regional home builders.****

1. Many builders are offering around $15k-$25k in closing costs, rate buydowns, etc. How are appraisers handling this? Are they making full adjustments, partial, or none at all and stating they are typical for the market?

2. If they are not making any adjustments and stating they are typical for the market, what are you, the review appraisers stating or commenting?

Who is a "review appraiser " nowadays?

In my experience field and desk reviews have been drastically cut back. They are also usually done months or a year plus later, after the loan closed - either when investors are looking hard at a group of loans or a problem comes up in a file/with a borrower.

As far as appraisers themselves who do new construction, how they/we handle builder concessions depends on many things, Imo they should be deducted if seen to have impacted the price. Of more importance is are appraisers using resales and to what extent, is it just throwing one on the grid to satisfy a requirement or are they really analyzing premiums and upgrades etc in the resale comps vs what a builder charges for them

If you are doing your own new construction appraisals you probably know what is right but perhaps are having a dilemma wrt what is right vs what the client wants vs what will make the deal fly. s

 

[NC Appraising]

I can't speak to what appraisers are doing, but what I would be doing is comparing these transactions to cash sales, including from other builders, to see if an adjustment is needed. Or even analyzing re-sales. Since the concessions often require that you use the builder's mortgage company, and the rate buydowns often go unreported, you can also compare sales from different mortgagees. Ultimately if the information is not being reported in the MLS, it will be tough to derive any adjustment.

As usual, hit the nail on the head.

I started this thread just on curiosity. I rarely appraise new construction tract homes (I'm not a preffered appraiser).

So I was curious when the home had 20k and the appraiser did not make an adjustment, what was there lame comment or was typical for the market?

Or are they actually making full adjustments and are making value in other areas...upgrades.

Ps, as for verification, fannie wanted us to look at the hud1....lol...what appraiser does that.

 

[JamesDPratt]

I would like to get some feedback on what review appraisers are seeing on new construction homes.

***I am only speaking of new construction that are located in tract PUD's and/or being built by national or regional home builders.****

1. Many builders are offering around $15k-$25k in closing costs, rate buydowns, etc. How are appraisers handling this? Are they making full adjustments, partial, or none at all and stating they are typical for the market?

2. If they are not making any adjustments and stating they are typical for the market, what are you, the review appraisers stating or commenting?

Well, this is a hot topic in my area as DR Horton is doing just that
They have a sheet they provide the buyer stating that if they if they use DR Horton Lending
the Builder will pay Point, Buy Downs, Closing Costs and a long list of items up to $12,500

I got this from the gal in the Sales Office as part of my data collection for a report on a Sale there
When I sent the report in DR Horton called and YELLED at me for including the Concessions in the report
and for making a negative adjustment for them on the comps that were sold with them
BUT
My report was also for FHA
SO
I contacted FHA and then sent them the sheet from the Builder
BOOM
FHA stated that those fees should be reports and adjusted dollar for dollar just as I did it in my report
and
They also, with the builders sheet in hand, stated they would place DR Horton on a Watch List
to see how other Appraisers reported on Sales within there reports

James

 

[NC Appraising]

Well, this is a hot topic in my area as DR Horton is doing just that
They have a sheet they provide the buyer stating that if they if they use DR Horton Lending
the Builder will pay Point, Buy Downs, Closing Costs and a long list of items up to $12,500

I got this from the gal in the Sales Office as part of my data collection for a report on a Sale there
When I sent the report in DR Horton called and YELLED at me for including the Concessions in the report
and for making a negative adjustment for them on the comps that were sold with them
BUT
My report was also for FHA
SO
I contacted FHA and then sent them the sheet from the Builder
BOOM
FHA stated that those fees should be reports and adjusted dollar for dollar just as I did it in my report
and
They also, with the builders sheet in hand, stated they would place DR Horton on a Watch List
to see how other Appraisers reported on Sales within there reports

James

Beast!!

This is why this profession is so jacked up. The GSEs and others allow for seller contributions.....and then they want us to be the bad guy and make SC adjustments. Arse backwards. Makes no $cents.

Here is one https://mattamyhomes.com/north-carolina/charlotte/promos/junejuly-2023

 

[Mark K]

FHA stated that those fees should be reports and adjusted dollar for dollar just as I did it in my report...

Dollar for dollar adjustment for seller's sales concessions. What a concept!!

I can almost hear the hair being pulled out by the 'market reaction to concessions' crowd.

 

[CGinMN]

I has one the other day where adjusting for seller concessions resulted in a range from $383,000 to $398,000. When no adjustment was made the range tightened from $395,000 to $401,000.

Believe it or not, the market does not always go dollar for dollar. No matter what your intuition or own biases tell you.

 

[CGinMN]

FHA stated that those fees should be reports and adjusted dollar for dollar

If someone from FHA told me that I would have read them the definition of market value on the 1004 form, which says explicitly to not do that.

 

[NC Appraising]

I has one the other day where adjusting for seller concessions resulted in a range from $383,000 to $398,000. When no adjustment was made the range tightened from $395,000 to $401,000.

Believe it or not, the market does not always go dollar for dollar.

I agree.

What if the home was only on the market for 1 day, listed at 290k and sold at 300k and had 8k in SC. Would it have sold for more if it was exposed to the market for a longer period?

I am not a dollar for dollar adjustment guy. I try to take each individual sale into account. How long was it on the market for? Did the list price get raised just to cover the SC after not selling for awhile? Repairs, DOM, highly motivated sellers, type of sale (estate, relo, divorce) etc.

New construction is a totally different animal as compared to the resale market in most cases (although I am selling some rate buydowns in the resale market)

In my market, due to the low supply, new contruction home prices are increasing. They were heavily discounting them and giving SC in the fall and winter months. So now we have date new sales with SC and heavy discounting to use for comps.