New Construction & Seller Concessions

[CPJ]

This may be a simple question to ask but I am curious how others list and deal with new construction concessions. For example, a subject is a newly constructed SFR that sold for $300,000. The builder/seller gives the buyer a $20,000 concession. The market value comes in at $302,000 for the report. Three weeks later on a different report you use that prior subject now as a closed sale comp for the same model home on a different report. Now after adjustments, three weeks later the same home that you valued at $302,000 now has an adjusted value of $282,000 due to the concession value being adjusted on the sales grid. What is it? Did the house lose value? How do others account/deal with this and your experiences are very much appreciated.

 

[J Grant]

What led you to appraise it for the subject for 302k when you appraised it three weeks ago?

 

[J Grant]

This may be a simple question to ask but I am curious how others list and deal with new construction concessions. For example, a subject is a newly constructed SFR that sold for $300,000. The builder/seller gives the buyer a $20,000 concession. The market value comes in at $302,000 for the report. Three weeks later on a different report you use that prior subject now as a closed sale comp for the same model home on a different report. Now after adjustments, three weeks later the same home that you valued at $302,000 now has an adjusted value of $282,000 due to the concession value being adjusted on the sales grid. What is it? Did the house lose value? How do others account/deal with this and your experiences are very much appreciated.

The above has issues with basic concepts....how long have you been appraising...

It did not "lose value" in three weeks. Either you over valued it three weeks ago, or the 20k concession had no impact on value and thus should not be deducted now.. It can not be both at the same time.

It sounds like you appraised to the meet the sale price three weeks ago... ( or what did you base the 302k value on ) .we never include concessions when we appraise a subject

Now that you are using the subject as a comp, for comps we do analyze concessions to see if the concession affected sale price -was the price inflated to include the concession or not? We use our judgment to determine whether to adjust for a concession /whether to adjust $ for $, in this case the 20k. Many times it does work that way but not always. Read the certs on 1004 for concession adjustment guideline

 

[Dublin ohio]

New construction "concessions' in my area are usually in the form of "free" upgrades, lot premium or patio. Just about every tract home builder has some sort of freebie in the contract. Not real. Builders typically do not give anything for "free". Some offer closing cost assistance if you use their in house financing. Again. Not real. They generally "own" the in house financing company.

 

[Jerry Bone Jr]

This may be a simple question to ask but I am curious how others list and deal with new construction concessions. For example, a subject is a newly constructed SFR that sold for $300,000. The builder/seller gives the buyer a $20,000 concession. The market value comes in at $302,000 for the report. Three weeks later on a different report you use that prior subject now as a closed sale comp for the same model home on a different report. Now after adjustments, three weeks later the same home that you valued at $302,000 now has an adjusted value of $282,000 due to the concession value being adjusted on the sales grid. What is it? Did the house lose value? How do others account/deal with this and your experiences are very much appreciated.

It doesn't matter what it appraised for 3 weeks ago. As a Comp, the sale price was $300k with a $20k concession. Your job is to figure out how much the $20k concession affected the price.

 

[TJSum]

Seems to me with your first assignment you "proved" the $20,000 seller concession did not inflate the price above market value or what the typical buyer would pay. Now if you make an adjustment, what you are saying is it did indeed inflate the price above market value. So you are being inconsistent.

One question, on your first assignment, did the comps have similar concessions that were not adjusted for, if so, then your first assignment might have an inflated value, leading to your problem on the second assignment.

 

[CPJ]

The above has issues with basic concepts....how long have you been appraising...

It did not "lose value" in three weeks. Either you over valued it three weeks ago, or the 20k concession had no impact on value and thus should not be deducted now.. It can not be both at the same time.

It sounds like you appraised to the meet the sale price three weeks ago... ( or what did you base the 302k value on ) .we never include concessions when we appraise a subject

Now that you are using the subject as a comp, for comps we do analyze concessions to see if the concession affected sale price -was the price inflated to include the concession or not? We use our judgment to determine whether to adjust for a concession /whether to adjust $ for $, in this case the 20k. Many times it does work that way but not always. Read the certs on 1004 for concession adjustment guideline

Thanks for your response but I probably didn't explain my question as thorough as I should have. The value of 302K is supported by the market and may be I should have framed my question better but I am not sure what a response is good for if you begin by asking how long someone has been appraising. Please do not respond....

 

[Amy Perkins]

I wish the builders would report the concessions in MLS, but they often don't. It's not a small concession, they got it for 20K less.

 

[Dublin ohio]

I wish the builders would report the concessions in MLS, but they often don't. It's not a small concession, they got it for 20K less.

Maybe for less. Maybe not. It would all depend on what kind of concession it was. Like I said earlier. Upgrades as a concession are probably nothing more than backround noise in my areas. Every builder includes them. If there was a true market for these upgrades. Buyers would be paying for them instead of the builder giving them away. It does not take a whole lot of upgrades to equal $20,000.00 with inflated upgrade prices for 2nd level flooring upgrade, 1st level cabinet upgrade, upgraded trim package, fixture upgrades etc.

 

[Terrel L. Shields]

If the market supported the value 3 weeks ago, likely there were similar concessions, right? Therefore, the concessions of the most recent sale are similarly supported as typical. The central question however was the concession real or was the actual price $20k less than the stated price and what "concessions" were in the comps used to support the value 2 weeks ago. For me, 90% of all builder / seller new home concessions are adjusted dollar for dollar as mere sales fluff.