Builder raises prices, no comps, no resales

[NachoPerito]

our job is not "what will the house sell for " ( unless you identify opinion of sale price as purpose of the appraisal)

The purpose of most appraisals is develop an opinion of market value , which may or may not be the same $ / as what it "sells for ",

The market value definition of price is not an appraisal opinion of value. The market value opinion is according to the terms and conditions of the MV definition to get to the equivalence of MV ( as developed by the appraisal ) and the $ most probable price ( at the MV definition terms )

I am not following you.

Our job is to determine "what the house would sell for on the open market, buyer and seller acting in their best interest, fair sale, open market, no undue stimulus, appropriate marketing time, yada yada yada

 

[Alsie35]

Ah, I remember these discussions in 2007-2008.

You are reading my mind. I have often thought (and did think particularly back then) that some builders figure they have found a way to essentially "print money" and they just jack up the prices every month without looking at a damned thing other than will someone sign on the dotted line. (The worst offender was the builder who did the Trilogy development near me. Every 3 months it seemed their new constructions would go up $30K during the peak of the bubble. Someone got rich there. Once the market crashed, this 2500-unit development became a ghost town with half the homes or more going REO.)

Once the market crashes these builders predictably go belly-up. I have turned down more than a score of new construction orders recently because a cursory market analysis showed that the builder was flat out-of-his-mind asking what he was asking.

These particular builders are putting in $1+ M homes in an area with no such preexisting homes, in order to draw in the Bay Area Refugees with more $$$ than common sense. I have often thought that people fleeing from apartment dwelling in places like SF or NYC need a mandatory re-education camp to teach them that "NO, A 3000SF ZERO-LOT-LINE PIECE OF CRAP LOT IS NOT GETTING A LOT FOR YOUR $$$!!"

The builders paying off the zoning boards to allow this !$@&, and the zoning board members as well ought to be lined up and .... well, you know ... .

Seriously, most other builders (thankfully the majority in this area) do seem to follow the actual market trends.

 

[DWiley]

our job is not "what will the house sell for " ( unless you identify opinion of sale price as purpose of the appraisal)

The purpose of most appraisals is develop an opinion of market value , which may or may not be the same $ / as what it "sells for ",

The market value definition of price is not an appraisal opinion of value. The market value opinion is according to the terms and conditions of the MV definition to get to the equivalence of MV ( as developed by the appraisal ) and the $ most probable price ( at the MV definition terms )

”what it will sell for” does not equal “most probable price” ?????

 

[J Grant]

The definition of MV includes an explicit assumption of the consummation of a sale as of that date and including additional assumptions about the conditions of that hypothetical sale.

agree, but the definition of MV is not an opinion of MV.

The definition of MV is the set of condition and terms that produce the most probable price, as a qualifier for the opinion of MV

 

[J Grant]

You are reading my mind. I have often thought (and did think particularly back then) that some builders figure they have found a way to essentially "print money" and they just jack up the prices every month without looking at a damned thing other than will someone sign on the dotted line. (The worst offender was the builder who did the Trilogy development near me. Every 3 months it seemed their new constructions would go up $30K during the peak of the bubble. Someone got rich there. Once the market crashed, this 2500-unit development became a ghost town with half the homes or more going REO.)

Once the market crashes these builders predictably go belly-up. I have turned down more than a score of new construction orders recently because a cursory market analysis showed that the builder was flat out-of-his-mind asking what he was asking.

These particular builders are putting in $1+ M homes in an area with no such preexisting homes, in order to draw in the Bay Area Refugees with more $$$ than common sense. I have often thought than people fleeing from apartment dwelling in places like SF or NYC need a mandatory re-education camp to teach them that "NO, A 3000SF ZERO-LOT-LINE PIECE OF CRAP LOT IS NOT GETTING A LOT FOR YOUR $$$!!"

The builders paying off the zoning boards to allow this !$@&, and the zoning board members as well ought to be lined up and .... well, you know ... .

Seriously, most other builders (thankfully the majority in this area) do seem to follow the actual market trends.

The problem with builder sales is that the builders create their own market from day one ( not always, but often ). How do those first set of builder offerings sell at X price? Sometimes the first few are straw deals to friends and associates, other times they are "appraised" by the builders in house "preferred financing" to hit the SC price, if an outside appraisal comes in lower the builder muscles it over to be re appraised - I've had it happen and seen it happen.

Thus the first set of comps is born from the builder, and each appraiser uses them...which is why appraisers need to use resales exposed to open market and how often have we seen a builder sale sell for 400k from builder ( 90% of sales financed in house lender ) and then a mere 6 months later if owner sells, it is lucky to sell for 350k.... again this does not always happen but happens quite a bit.

 

[J Grant]

”what it will sell for” does not equal “most probable price” ?????

what it will see for can equal most probable price, but we are not asked to give an opinion of most probable price- )even if that price happens at MV terms)...

 

[George Hatch]

At this point I don't know what you're even arguing about. That most probable price isn't a qualifier for MV, it's a synonym for MV. That's what this sentence means:

"DEFINITION OF MARKET VALUE: The most probable price which a property should bring ....."​

​

And although we commonly assert that closed sales are the best indicators it's also fair to say that they aren't necessarily the only indicators we can use to develop our opinions.

 

[Mejappz]

In the past year, I have stopped doing new construction appraisals. The last two I accepted, I called the builders office and asked for comparable sales and any concessions involved with each sale. I told them I needed the signed HUD statements as well. The response I got both times was, “We only give that information out to our appraisers.” So, I eventually called the lender, told them what happened, and asked them to reassign the assignment. Even if they ultimately completed, it is not worth the hassle, in my opinion. Btw the Company was Lennar and DR Horton.

 

[J Grant]

from the URAR : our statement of value opinion" (insert in red mine)

Based on a complete visual inspection of the interior and exterior areas of the subject property, defined scope of work, statement of assumptions and limiting conditions, and appraiser’s certification, my (our) opinion of the market value, (OPINION from the appraisal ) - as defined, ( the market definition "as defined ") of the real property that is the subject of this report is

 

[J Grant]

The appraisal assignment purpose stated is "an opinion of market value "

The appraisal assignment purpose is not stated is "an opinion of most probable price "