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New Construction

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Nevada Life

Freshman Member
Joined
Mar 14, 2014
Professional Status
Certified Residential Appraiser
State
Nevada
Working on an appraisal for new construction track home

Do you use ALL new homes sales from the builder and competing projects? And do not use resales in the project?

Or

Do you use the resales in the project from an older phase in the project that are resales that range in age from 2-6 years old & include a 1 or 2 builder sales from the subject's project?


Thanks
 

J Grant

Elite Member
Joined
Dec 9, 2003
Professional Status
Certified Residential Appraiser
State
Florida
Use some of each of the above.

Many recent and older threads on new construciton, search for them they will show up, some in general some in urgent help wanted section
 

residentialguy

Elite Member
Joined
Mar 24, 2009
Professional Status
Certified Residential Appraiser
State
Minnesota
What JG said, use both. 3 major things to watch out for.
1. New construction can be overpriced and manipulated by a builder. Special financing affecting the price. Some have gone so far as to use straw buyers.
2. You need to watch out for super-adequacy where a buyer pours money into finishing that is strictly their (bad) taste and not the markets.
....and on the other side of the fence:
3. Resales are not new and sometimes have a large variance in price from new. People like new things and pay a premium. They are different buyers...don't equate them.
 

Mike Garrett RAA

Elite Member
Gold Supporting Member
Joined
Jan 14, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
The preferred method is to use 1 from the same builder, 1 from a competing builder, and 1 resale. That said, some times that isn't possible. IN MY MARKET, there are some single builder subdivisions that are so unique there isn't a competing builder and no resales. If that is the case the appraiser has to decide what is "most comparable" and do what is necessary to create a credible appraisal.

Do builders establish a market? Of course they do. Do they control prices? Of course they do. Does that artificially inflate the market? That depends.
 
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J Grant

Elite Member
Joined
Dec 9, 2003
Professional Status
Certified Residential Appraiser
State
Florida
Mike's advice is good, and describes a minimum ( Fannie has minimum requirements such as at least one resale/ or one outside sale , they dont; want you relying ONLY on new sales from same subject builder, though you can use as many sales from each source to get credible conclusions. Not every sale has to be on the grid, I typically analyze a number use conclusions to support adjustments and conclusions of the comps used.

I often use 2 builder new sales from subject subdivision, 1 or 2 resales from subdivision, and if appropriate, one outside sale, either new or a recently built resale depending on if there was more than one resale in subdivision. Pending and active listings of houses in subdivision not from builder as well as pendings from builder are a good indicator as well for trends

It all depends on what is available of course, in large subdivisions, can be almost too many sales to choose from, other times the pickings are slim and one has to dig for the comps.
 

Tim Hicks (Texas)

Elite Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
Texas
One in, one out, one re-sale. Builder's can definitely inflate the market. I have one right now, where the same builder is charging $100,000 more for the same plan from six months ago. No new closings at the new price.
 

Tim Hicks (Texas)

Elite Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
Texas
I know I am being rude, but you need to read the Fannie Mae Selling Guide with reference to reviewing the appraisal report. There is lots of good information in there. No mandatory HOA dues, not a PUD to Fannie. New home comparable sale. No 10,15, 25 % adjustment rule anymore, etc.
 
D

Deleted member 134708

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For FNMA I do 4+ builder sales and 2 competing builder sales.

For everyone else, I do 6-9 builder sales.
 

TRESinc

Elite Member
Joined
Dec 1, 2011
Professional Status
Licensed Appraiser
State
Ohio
Mike's advice is good, and describes a minimum ( Fannie has minimum requirements such as at least one resale/ or one outside sale ,

that is not completely correct. in newer developments the appraiser must use one sale from outside the development. read the selling guide.
 

Vermonter

Senior Member
Joined
Mar 21, 2007
Professional Status
Certified Residential Appraiser
State
Vermont
Depends what is available. I only have a few developments of the sort which would even allow me to use a sale from the same builder. In that case I try to use 2 builder sales, 1 resale and 1 outside....but it rarely works out that way. Most of the time all comps are new construction outside the subdivision and from different builders. This tends to keep builders in line with the market.
 
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