Lumber Adjustment

[TerryRohrer]

And... if you refuse to consider it, you lose a Client. If the Builder does significant business with that Lender... they will kick you to the curb without any remorse at all.

Well, my fees are not a retainer for all possibilities regarding a property for months or years to come. So, what is your response in this situation? Tell your client, oh, yeah, I didn't think of that, let me add $17k to my opinion of value to cover those expenditures? And, do you want some entrepreneurial profit with that? Do as you will, but I don't negotiate my opinion with any client, good or bad.

 

[Mark K]

Lumber prices have spiked since the floods a few months ago in Canada washed out a lot of roads and bridges; can't get trees to the lumber mills or the processed lumber to the buyers.

Question? Have the market values in the subject area also spiked accordingly? I don't know the area but I'd be skeptical.

Another question? Since the builder wants a price increase for this buyer due to the cost increase will he also contact the bank or the appraiser to lower the appraised value for other buyers when the prices fall back to normal? Just a rhetorical question; I think we all know the answer.

Also, has the buyer agreed to this increase and have they signed an amendment to the purchase agreement?

Prices were falling most of the year before the floods. My guess is that he didn't lock in the price for the lumber package hoping that the lumber price would continue to fall and he'd keep the difference. Oops! Lumber went up. He gets to eat the difference. He probably made a lot of extra profit for the homes he contracted in early 2021 when the lumber prices dropped over the summer.

 

[Ariba]

If the lumber prices had dropped would the builder have reimbursed the buyer? Cost of doing business as a builder.

 

[Dublin ohio]

Not always, but it can.

Especially in new construction

 

[jay trotta]

Some years back I remember a concrete guy I know was in the middle of a foundation and the next delivery went up 40%, asked his customer if they would split the difference; of course the customer would not agree and it cost him his profit. Sometimes........it can be a problem.

You secure an Order, agree to the Terms and when you go out see that it's different from what was discussed, can you get a Fee Increase ? Maybe - Maybe not

 

[shrubberyvaluation]

OK, does a typical buyer care that lumber costs are higher? They are still competing against existing homes aren't they?

 

[Dublin ohio]

They are still competing against existing homes aren't they?

Depends on the area. In some markets. New construction might be the only tangible alternative. Due to limited existing home listings

 

[Tru Red]

The appraisal report is your/my opinion of value as of a specific date.

 

[sputnam]

Well, my fees are not a retainer for all possibilities regarding a property for months or years to come. So, what is your response in this situation? Tell your client, oh, yeah, I didn't think of that, let me add $17k to my opinion of value to cover those expenditures? And, do you want some entrepreneurial profit with that? Do as you will, but I don't negotiate my opinion with any client, good or bad.

No. You tell the builder that he/she needs to contact the Lender with any concerns. Then, if your Client requests a reconsideration of value, you do it. If you determine that the information in the ROV has no relevance, you respond, in writing, explaining why. If you determine that you were wrong, you fix it and move on.

 

[Cob]

Hey folks! Have you all heard of this lately? New construction, appraisal completed October 2021, 90% complete. 1004D ordered first week of November. Appraisal legitimately appraised for purchase price.

Fast forward to last week, the builder emailed me a copy of the lumber invoice. $17k more than what was in the original plans and specs. The builder had the gall to ask if I would amend the appraisal because there was some concern about the loan.

have you all experienced this and how did you handle?

If the property was completed the first week in November, it's not like they went out and bough the lumber that same week, the lumber used to build the property had to have been purchased months before, lumber prices corrected in August and went from $1,515 per thousand board feet in May to $389 in August and is now back up to $870. Large builder by materials in bulk, who knows when the builder purchased the lumber for the house, they may have bought it in August when it was $389.

The supply chain is so dysfunctional even lumber prices are back up 120% | Fortune

On Wednesday, the futures price for framing lumber hit $870 per thousand board feet. That's up 124% since August.

fortune.com