Builder raises prices, no comps, no resales

[Tru Red]

This exact same scenario has played out for me many many times. What I have ALWAYS done is provide my appraisal report with my opinion of value based on facts. I'm not a numbers hitter.

It's the option of the Buyer's to add their own cash to the deal if they choose.

 

[Joe Flacco]

Personally I take anything a builder says with a grain of salt. Developers are not very forthcoming when it comes to sales data and concessions as they consider their sales activities and inventory proprietary information. Find a resale and/or sale from a competitive builder.

All the builders I meet are mostly smaller custom home builders so right now I am interviewing several to see what they say about costs today.

 

[Elliott]

First, the builder is not under an obligation to sell his property for any price other than the one he chooses. He doesn't have to have a good reason or any reason to set his price.
Second, I've seen in my market, list prices for houses which were listed during construction have increasing prices. The reasons for increasing list price can include the builder adding features or increasing material/labor prices, or because the builder thinks the supply of his new shiny houses are in short supply in the market and he sell them for more money.

I once had a builder threaten to kill me if I ever came in under his sales price again. Isn't appraising fun? (post script, builder eventually went bankrupt, lost his own big house, divorced, and apparently involved in incest).

 

[NachoPerito]

All the builders I meet are mostly smaller custom home builders so right now I am interviewing several to see what they say about costs today.

Costs dictate if a builder will start the project, but not what they will sell finished homes for. Lumber skyrocketed to over $800 in September and now has fallen to $600. The builder reaps the rewards when lumber falls and eats dirt when it skyrockets.

 

[Joe Flacco]

The price also increases once the house is complete because now the house is move in ready and the buyer doesn't have to wait for construction. Plus different builder do different things. There is a builder here that lists proposed homes on MLS for low prices but the way he structures the deals is so that the buyer buys the land and obtains the construction loan. Once in a while he goes spec and will raise the price while once construction begins and once construction is almost complete will raise the price again because it is move in ready.

 

[J Grant]

PRICES PRICES PRICES, so many posts are ONLY about prices and NOTHING about the market value elements of comparison, is this a RE appraiser bulletin board or a sales agent board? Because it sure sounds like the perspective of a sales agent on a lot of these posts. Le'ts get the appraisal to "support " the price with the pending's!! Because buyers are willing to pay it DOH !! Well are they they willing to pay it only using OPM, ? or would any of them use own funds to close a gap ? What about addressing the fact the same builder model sold for less a few months ago. (is builder offering concessions ?)

Do the work, apply a time /market condition adjustment from the MARKET, not the builder 's own price jump. Research other comps both sold and pending, including resales, put all the comps from this builder and outside , make any appropriate adjustments and see what is the market value opinion is . It may be the same as, higher than , or lower than the CS price.

But if you shape the appraisal around hitting the SC price, it was a predetermined result.

 

[Joe Flacco]

Costs dictate if a builder will start the project, but not what they will sell finished homes for. Lumber skyrocketed to over $800 in September and now has fallen to $600. The builder reaps the rewards when lumber falls and eats dirt when it skyrockets.

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When a builder goes spec, yeah. Would not go spec without EI based on costs.

 

[George Hatch]

A broker or builder's job is to get the highest price they can so in that role it makes sense for them to look at MV as meaning "1 willing buyer + 1 willing seller". That builder may not have any direct comparables in that locale to support their opinion of what the home will sell for, but if they're building elsewhere and are seeing pricing increase at their other projects then that would be sufficient to make them believe the same will apply in this location.

Not that being aware of any of that helps an appraiser to find comps for their appraisal assignment.

 

[NachoPerito]

PRICES PRICES PRICES, so many posts are ONLY about prices and NOTHING about the market value elements of comparison, is this a RE appraiser bulletin board or a sales agent board? Because it sure sounds like the perspective of a sales agent on a lot of these posts. Le'ts get the appraisal to "support " the price with the pending's!! Because buyers are willing to pay it DOH !! Well are they they willing to pay it only using OPM, ? or would any of them use own funds to close a gap ? What about addressing the fact the same builder model sold for less a few months ago. (is builder offering concessions ?)

Do the work, apply a time /market condition adjustment from the MARKET, not the builder 's own price jump. Research other comps both sold and pending, including resales, put all the comps from this builder and outside , make any appropriate adjustments and see what is the market value opinion is . It may be the same as, higher than , or lower than the CS price.

But if you shape the appraisal around hitting the SC price, it was a predetermined result.

I hope nobody was implying hitting a target. I wasn't.

If the home sales sold for $440k and it was 3 months ago. That same house is $450k three months later if the market is going up 10%.

I view pending sales as very valuable, but it needs to be a pending sale and not a reservation with minimal money down.

 

[Salty]

I do not place so much weight on pendings that I would use them to increase my value opinion above sold sales. At least I have never had to do that. I also would not use pendings to establish a market condition adjustment. To me pendings are just listings. Similar to an agent telling me that they have additional offers above contract price. Pendings still have to settle and just because the contract price is $x does not mean it will settle for that. Undue stimuli results in crazed buyers willing to pay anything regardless of past recent sales. This is speculation.