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Builders Paying People Back If Home Value Drops

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Randolph Kinney

Elite Member
Joined
Apr 7, 2005
Professional Status
Retired Appraiser
State
North Carolina
This guarantee is not worth very much if the builder goes out of business because they have to honor those guarantees.
 

TJSum

Elite Member
Joined
Nov 12, 2007
Professional Status
Certified Residential Appraiser
State
Maryland
"More home builders are offering price guarantees to calm the fears of prospective buyers who are afraid the biggest purchase of their lives will immediately fall in value.
KB Homes, Pacific West Cos., Granville Homes and others are telling customers they will guarantee the lower base price if the prices fall during a certain period.
Granville and KB, which has four tracts in Fresno and Madera and is the fourth largest builder in the area in terms of sales, offers the price guarantee during escrow, which is typically five or six months, said Augie Dent, division manager.
Pacific West, a newcomer to the area that is building the Montage condominium complex in Clovis, is taking a more aggressive approach. The company offers the guarantee until the project is finished and the last condo is sold. "That's anytime between now and 21/2 years," said Michael Plowman, sales manager of Montage at Armstrong and Herndon avenues. "When the last one is sold, we'll rebate them whatever the appraisal says the difference was [between the price the buyer paid and the price at the end]."


If they guarantee the "base price", they could change the overall price by offering more closing help or adding on options, plenty of loopholes in this promise. Not sure what they mean regarding "whatever the appraisal says"? Who's appraisal? If it is your typical mortgage lending appraisal, not sure if this would be included as the intended use and user.
 

Alison Swain

Senior Member
Joined
Sep 13, 2005
Professional Status
Certified Residential Appraiser
State
Florida
"More home builders are offering price guarantees to calm the fears of prospective buyers who are afraid the biggest purchase of their lives will immediately fall in value.
KB Homes, Pacific West Cos., Granville Homes and others are telling customers they will guarantee the lower base price if the prices fall during a certain period.
Granville and KB, which has four tracts in Fresno and Madera and is the fourth largest builder in the area in terms of sales, offers the price guarantee during escrow, which is typically five or six months, said Augie Dent, division manager.
Pacific West, a newcomer to the area that is building the Montage condominium complex in Clovis, is taking a more aggressive approach. The company offers the guarantee until the project is finished and the last condo is sold. "That's anytime between now and 21/2 years," said Michael Plowman, sales manager of Montage at Armstrong and Herndon avenues. "When the last one is sold, we'll rebate them whatever the appraisal says the difference was [between the price the buyer paid and the price at the end]."


If they guarantee the "base price", they could change the overall price by offering more closing help or adding on options, plenty of loopholes in this promise. Not sure what they mean regarding "whatever the appraisal says"? Who's appraisal? If it is your typical mortgage lending appraisal, not sure if this would be included as the intended use and user.

My thoughts exactly --- price stays the same, but new owners get a new Mercedes in the garage, 5 years of gasoline or no mtg. payments for two years. :leeann:
 

bart nathan

Member
Joined
Jun 9, 2005
Professional Status
Certified Residential Appraiser
State
California
The value never drops they just offer more upgrades for free, flat screen, furniture, vacation, car ect.
 
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